Top Foreign Capital Prospects for the GCC Region

Risks are slanted to the downside. In case of an extended conflict, the present effect on the area will be compoundedthrough raised energy and food rates, declining trade, tourism and remittances, increased financial pressures, and displacement. "The existing crisis is a stark tip of the work ahead for the region: not only to weather shocks, but to reconstruct more durable economies with more powerful macroeconomic basics, innovate and enhance governance, purchase infrastructure, and boost employment-creating sectors," said.

With peace and the right action, countries can develop the institutions, abilities and competitive sectors that develop opportunities 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 federal government actions to increase tactical business activity as a driver of financial development and job development.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, but the outcomes have actually been mixed. The report highlights the critical need for strong institutions and cautious targeting of policies. "As countries face the heavy toll of the present dispute, it is very important to likewise not forget the work needed for long-lasting peace and success," said.

Upcoming GCC Financial Forecasts

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared straight for the financing occupation. The GCC economy faces a significant contraction this year pending details of the US-Iran agreement to end the war. We anticipate energy flows, tourism and investor belief to gradually normalise as war interruptions subside.

ANSR July GCC PRs 50DR+

The interim arrangement between the United States and Iran is a substantial action towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely take some time, but the threat of a recession-inducing oil cost spike has declined. 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 anticipate a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% growth before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their failure to avoid the interruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP projection to agreement by 2.4% compared to a 0.2% decrease predicted formerly. We anticipate Oman and Saudi Arabia to be the least adversely affected by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage incurred in the last few months is significant. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed because 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 struck late in the quarter.

Securing GCC Investments against 2026 Trends

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered substantial oil and gas production losses given that the start of the dispute. May information reveal regional 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 actually 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 decline in a number of years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a badly depressed base. Oil prices have actually been unpredictable, relieving listed below $85 per barrel as the interim arrangement was revealed.

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

The May PMI studies reported output development reaching its greatest level in 3 months, driven mainly by improved domestic demand. Nevertheless, they remain below long-run averages, with weak export orders and rate pressures from higher material and transportation costs are a common theme. In general, we expect 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 years.