Top Foreign Investment Prospects in the GCC Market

Dangers are tilted to the downside. In the occasion of a prolonged conflict, the existing effect on the region will be compoundedthrough raised energy and food costs, declining trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a stark reminder of the work ahead for the area: not only to weather shocks, but to restore more durable economies with more powerful macroeconomic fundamentals, innovate and improve governance, buy infrastructure, and boost employment-creating sectors," said.

With peace and the right action, nations can develop the institutions, capabilities and competitive sectors that produce opportunities for individuals." With this long-lasting vision in mind, the report takes a close appearance at the area's capacity for commercial policy federal government actions to increase strategic service activity as a chauffeur of financial growth and task production.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned business, but the results have been mixed. The report highlights the vital need for strong institutions and careful targeting of policies. "As countries deal with the heavy toll of the present conflict, it is necessary to likewise not forget the work needed for lasting peace and prosperity," said.

Driving Economic Growth through Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared straight for the finance occupation. The GCC economy faces a significant contraction this year pending information of the US-Iran arrangement to end the war. We expect energy circulations, tourism and investor belief to slowly normalise as war disruptions go away.

ANSR July GCC PRs 50DR+

The interim arrangement in between the US and Iran is a considerable step towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take some time, however the danger of a recession-inducing oil price spike has actually decreased. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected 3 months earlier, 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), higher than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their failure to prevent the disruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP forecast to contract by 2.4% compared to a 0.2% decrease forecasted previously. We expect 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 financial damage incurred in the last few months is considerable. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace 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.

How Industrial Diversification Will Shape GCC Markets

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered substantial oil and gas production losses since the start of the conflict. May information show local production almost 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 actually helped avoid an even larger 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 a number of decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a badly depressed base. On the other hand, oil rates have been unpredictable, easing listed below $85 per barrel as the interim arrangement was revealed.

In the medium term, we expect oil prices to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ permits a gradual boost in its output towards the 5mn barrel per day production target once trade normalises. Versus this backdrop, 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 enhanced domestic need. However, they remain listed below long-run averages, with weak export orders and cost pressures from greater product and transportation expenses are a typical style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual recovery over the remainder of the decade.