Analyzing GCC Market Potential for 2026

Risks are slanted to the disadvantage. In the occasion of an extended dispute, the present influence on the area will be compoundedthrough elevated energy and food costs, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a plain suggestion of the work ahead for the area: not just to weather shocks, however to reconstruct more resistant economies with more powerful macroeconomic basics, innovate and enhance governance, purchase infrastructure, and increase employment-creating sectors," stated.

With peace and the best action, nations can build the organizations, capabilities and competitive sectors that produce opportunities for people." With this long-lasting vision in mind, the report takes a close take a look at the area's potential for industrial policy federal government actions to increase tactical organization activity as a driver of economic growth and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually adopted industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, but the outcomes have been mixed. The report highlights the crucial requirement for strong organizations and careful targeting of policies. "As nations face the heavy toll of the present dispute, it is important to also not forget the work needed for lasting peace and success," said.

How Economic Shifts Can Shape Arabian Markets

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared directly for the financing occupation. The GCC economy deals with a significant contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy flows, tourist and investor belief to slowly normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim arrangement between the US and Iran is a significant action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely require time, but the threat of a recession-inducing oil cost spike has declined. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months back, 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), higher than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their inability to prevent the disruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP forecast to contract 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 conflict, with both economies continuing to expand this year.

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

Why Economic Diversification Will Shape Arabian Markets

Aside from Oman, all GCC producers along with Iran and Iraq have suffered comprehensive oil and gas production losses considering that the start of the dispute. May information 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 assisted prevent an even bigger 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 a number of years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. Oil prices have been volatile, alleviating below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect oil rates 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 as soon as trade normalises. Against this background, the UAE will speed up the construction of a new West-East pipeline that should double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in 3 months, driven largely by improved domestic demand. They remain listed below long-run averages, with weak export orders and rate pressures from higher material and transport expenses are a common 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 progressive recovery over the remainder of the decade.