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Dangers are slanted to the disadvantage. In case of an extended dispute, the present effects on the area will be compoundedthrough raised energy and food costs, declining trade, tourism and remittances, increased financial pressures, and displacement. "The existing crisis is a plain tip of the work ahead for the region: not just to weather shocks, but to restore more resilient economies with more powerful macroeconomic fundamentals, innovate and improve governance, purchase facilities, and enhance employment-creating sectors," stated.

With peace and the right action, countries can develop the organizations, abilities and competitive sectors that produce opportunities for people." With this long-lasting vision in mind, the report takes a close look at the region's capacity for industrial policy federal government actions to increase strategic business activity as a driver of financial development and job development.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, however the results have actually been mixed. The report highlights the critical need for strong institutions and careful targeting of policies. "As countries deal with the heavy toll of today conflict, it is essential to also not lose sight of the work needed for lasting peace and success," said.

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Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared straight for the finance occupation. The GCC economy deals with a marked contraction this year pending information of the US-Iran arrangement to end the war. We anticipate energy flows, tourism and financier sentiment to gradually normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a considerable action towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take time, but the threat of a recession-inducing oil cost spike has declined. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months back, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% expansion before the war), greater than the decrease in the 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 local shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP projection to agreement by 2.4% compared to a 0.2% decline forecasted previously. We anticipate 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 economic damage incurred in the last few months is considerable. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate because the Covid pandemic. On a seasonally adjusted basis, GDP contracted 1.2% q/q, driven by a 6.8% fall in oil activities as the Strait of Hormuz disruption struck late in the quarter.

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Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered extensive oil and gas production losses considering that the start of the conflict. Might information reveal local production nearly cut in half from pre-war levels, with the decline deepening relative to March and April. Rerouting efforts, consisting of by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have assisted avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

However, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in numerous decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. On the other hand, oil prices have been volatile, reducing listed below $85 per barrel as the interim contract was revealed.

In the medium term, we expect oil costs to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a gradual boost in its output towards the 5mn barrel daily production target as soon as trade normalises. Against this background, the UAE will accelerate the building of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in 3 months, driven mainly by improved domestic need. They remain listed below long-run averages, with weak export orders and price pressures from greater material and transport 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 steady healing over the remainder of the decade.