Advancing Non-Oil Growth through Strategic Diversification

Threats are slanted to the disadvantage. In case of an extended conflict, the current effect on the area will be compoundedthrough elevated energy and food prices, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a plain pointer of the work ahead for the area: not only to weather shocks, however to restore more resilient economies with stronger macroeconomic fundamentals, innovate and enhance governance, buy infrastructure, and improve employment-creating sectors," stated.

With peace and the ideal action, nations can develop the institutions, capabilities and competitive sectors that create chances for individuals." With this long-term vision in mind, the report takes a close appearance at the region's potential for commercial policy government actions to increase tactical company activity as a motorist of financial development and task production.

ANSR July GCC PRs 50DR+

Governments in the area have embraced commercial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned enterprises, but the results have actually been blended. The report highlights the vital need for strong institutions and cautious targeting of policies. "As countries face the heavy toll of the present conflict, it is important to likewise not forget the work needed for lasting peace and prosperity," stated.

Optimizing Wealth Diversification in a 2026 Economy

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared straight for the finance profession. The GCC economy faces a significant contraction this year pending details of the US-Iran arrangement to end the war. We expect energy circulations, tourist and financier sentiment to gradually 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 complete go back to normality in the Strait of Hormuz will likely take time, but the threat of a recession-inducing oil price spike has actually declined. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months ago, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus projected 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 prevent the interruption to local shipping, war-driven facilities damage and tourism losses.

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

The economic damage incurred in the last couple of months is considerable. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed considering that 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 disturbance struck late in the quarter.

Analyzing Regional Market Resilience in 2026

Aside from Oman, all GCC producers in addition to Iran and Iraq have actually suffered extensive oil and gas production losses because the start of the conflict. Might data show regional production almost 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 assisted prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, 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 largely by normalisation from a badly depressed base. Meanwhile, oil rates have been unpredictable, reducing listed below $85 per barrel as the interim agreement was announced.

In the medium term, we anticipate oil rates to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ permits a steady boost in its output towards the 5mn barrel per day production target as soon as trade normalises. Against this background, the UAE will accelerate the building of a new West-East pipeline that ought 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 improved domestic demand. Nevertheless, they remain below long-run averages, with weak export orders and rate pressures from greater product and transportation expenses are a common theme. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady recovery over the rest of the decade.