Mastering Investment Diversification in a Global Economy

Dangers are slanted to the disadvantage. In case of an extended conflict, the current effect on the region will be compoundedthrough raised energy and food prices, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a plain pointer of the work ahead for the region: not only to weather shocks, however to restore more resilient economies with stronger macroeconomic fundamentals, innovate and improve governance, invest in facilities, and improve employment-creating sectors," said.

With peace and the right action, nations can develop the institutions, capabilities and competitive sectors that develop opportunities for people." With this long-term vision in mind, the report takes a close take a look at the area's capacity for industrial policy federal government actions to increase tactical service activity as a driver of financial development and job production.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually adopted commercial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, but the outcomes have been mixed. The report highlights the important requirement for strong institutions and mindful targeting of policies. "As nations deal with the heavy toll of today conflict, it is very important to likewise not lose sight of the work needed for long-lasting peace and prosperity," said.

Advancing Non-Oil Success via Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared directly for the finance occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran contract to end the war. We anticipate energy circulations, tourism and investor sentiment to slowly normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim contract in between the United States and Iran is a considerable step towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely require time, but the risk of a recession-inducing oil rate spike has decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted three months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), greater than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their inability to avoid the interruption to local shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection to contract by 2.4% compared to a 0.2% decrease projected previously. We expect Oman and Saudi Arabia to be the least negatively impacted by the fallout from the dispute, with both economies continuing to broaden this year.

The financial damage sustained in the last couple of months is significant. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace since 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.

Future Business Climate of the GCC

Aside from Oman, all GCC producers along with Iran and Iraq have suffered substantial oil and gas production losses given that the start of the dispute. Might data reveal local production nearly cut in half 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 bigger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in numerous decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a badly depressed base. Oil costs have actually been volatile, relieving below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil prices to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ permits for a gradual boost in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this backdrop, the UAE will accelerate the building and construction of a brand-new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in 3 months, driven mainly by enhanced domestic demand. They remain below long-run averages, with weak export orders and price pressures from greater product and transportation expenses are a common style. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual recovery over the remainder of the decade.