Future Investment Landscape in Arabia

Dangers are tilted to the disadvantage. In case of an extended conflict, 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 present crisis is a stark tip of the work ahead for the area: not only to weather shocks, however to reconstruct more durable economies with stronger macroeconomic fundamentals, innovate and improve governance, buy infrastructure, and enhance employment-creating sectors," said.

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

ANSR July GCC PRs 50DR+

Governments in the area have embraced commercial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned business, however the results have actually been mixed. The report highlights the important requirement for strong organizations and mindful targeting of policies. "As nations deal with the heavy toll of today conflict, it is necessary to likewise not forget the work needed for lasting peace and prosperity," said.

2026 Investment Landscape of Arabia

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared directly for the finance profession. The GCC economy faces a significant contraction this year pending details of the US-Iran contract to end the war. We anticipate energy circulations, tourist and financier belief to gradually normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim arrangement between the US and Iran is a significant step towards reaching a full-blown deal. 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 declined. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their inability to prevent the interruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP forecast to contract by 2.4% compared to a 0.2% decrease projected previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to broaden this year.

The financial damage sustained in the last couple of months is considerable. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate 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.

Accelerating Economic Success through Global Diversification

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have actually suffered substantial oil and gas production losses considering that the start of the conflict. Might data show local 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 avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in a number of decades. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. Oil prices have actually been unpredictable, relieving below $85 per barrel as the interim contract was announced.

In the medium term, we anticipate oil prices to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a steady increase in its output towards the 5mn barrel per day production target as soon as trade normalises. Versus this background, the UAE will speed up the construction of a brand-new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in three months, driven mostly by enhanced domestic demand. They stay listed below long-run averages, with weak export orders and cost pressures from higher material and transportation expenses are a common theme. 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 rest of the years.