Mastering Capital Diversification in a Global Economy

Risks are tilted to the downside. In the occasion of an extended dispute, the existing influence on the area will be compoundedthrough raised energy and food costs, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain reminder of the work ahead for the region: not only to weather shocks, however to restore more resilient economies with more powerful macroeconomic fundamentals, innovate and enhance governance, purchase facilities, and improve employment-creating sectors," said.

With peace and the right action, countries can build the institutions, abilities and competitive sectors that produce opportunities for individuals." With this long-term vision in mind, the report takes a close look at the area's capacity for commercial policy government actions to increase tactical business activity as a motorist of financial growth and task creation.

ANSR July GCC PRs 50DR+

Governments in the area have adopted industrial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, however the results have been blended. The report highlights the vital need for strong organizations and cautious targeting of policies. "As countries face the heavy toll of the present dispute, it is necessary to likewise not lose sight of the work required for long-lasting peace and success," stated.

Foreign Capital Prospects across the GCC

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared directly for the finance occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran agreement to end the war. We expect energy flows, tourist and financier sentiment to slowly normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim arrangement in between the US and Iran is a significant action towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely require time, however the risk of a recession-inducing oil price spike has decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months ago, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their inability to avoid the disruption to regional shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months back, with GDP forecast to contract by 2.4% compared to a 0.2% decrease projected formerly. We anticipate Oman and Saudi Arabia to be the least negatively impacted by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage sustained in the last few months is substantial. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed considering that the Covid pandemic. On a seasonally changed basis, GDP contracted 1.2% q/q, driven by a 6.8% fall in oil activities as the Strait of Hormuz interruption struck late in the quarter.

Foreign Investment Prospects across the Middle East

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered extensive oil and gas production losses considering that the start of the conflict. Might data reveal local production nearly halved from pre-war levels, with the decrease deepening relative to March and April. Rerouting efforts, including by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in a number of years. We then expect a 23.5% rebound next year, driven mainly by normalisation from a badly depressed base. Oil rates have actually been unstable, alleviating below $85 per barrel as the interim arrangement was revealed.

In the medium term, we expect oil rates to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ permits for a progressive increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this background, the UAE will accelerate the building of a new West-East pipeline that should double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in 3 months, driven largely by improved domestic need. However, they stay below long-run averages, with weak export orders and cost pressures from greater material and transportation costs are a typical theme. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual healing over the rest of the decade.