Securing Regional Investments for 2026 Trends

Risks are tilted to the disadvantage. In the event of an extended dispute, the current influence on the region will be compoundedthrough elevated energy and food costs, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a stark reminder of the work ahead for the region: not just to weather shocks, however to restore more durable economies with stronger macroeconomic principles, innovate and improve governance, purchase infrastructure, and boost employment-creating sectors," said.

With peace and the ideal action, nations can develop the institutions, capabilities and competitive sectors that produce chances for people." With this long-lasting vision in mind, the report takes a close take a look at the area's capacity for commercial policy government actions to increase strategic organization activity as a motorist of financial growth and task creation.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced industrial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, however the results have been mixed. The report highlights the critical need for strong institutions and mindful targeting of policies. "As countries face the heavy toll of today conflict, it is important to likewise not lose sight of the work needed for lasting peace and success," stated.

International Capital Prospects across the Middle East

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

ANSR July GCC PRs 50DR+

The interim contract between the United States and Iran is a substantial action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take some time, however the danger of a recession-inducing oil cost spike has actually declined. International 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), higher than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest hit, owing to their failure to avoid the disturbance to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP forecast to contract by 2.4% compared to a 0.2% decline forecasted formerly. We anticipate Oman and Saudi Arabia to be the least adversely affected by the fallout from the conflict, with both economies continuing to broaden this year.

The economic damage sustained in the last few months is substantial. Saudi GDP information for Q1 showed 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 disruption hit late in the quarter.

Strategic Economic Expansion in the Future

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered extensive oil and gas production losses because the start of the conflict. Might data show regional production nearly halved from pre-war levels, with the decline 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 actually helped prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

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

In the medium term, we anticipate oil prices to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a steady increase in its output towards the 5mn barrel each day production target when trade normalises. Against this background, the UAE will speed up the building of a new West-East pipeline that need to double the capacity of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in 3 months, driven largely by enhanced domestic demand. Nevertheless, they stay listed below long-run averages, with weak export orders and rate pressures from higher product and transport costs are a common style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive recovery over the remainder of the years.