International Investment Prospects within the GCC

Threats are tilted to the downside. In case of a prolonged dispute, the current effect on the region will be compoundedthrough raised energy and food rates, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a stark suggestion of the work ahead for the area: not just to weather shocks, but to reconstruct more resilient economies with more powerful macroeconomic basics, innovate and enhance governance, purchase infrastructure, and increase employment-creating sectors," stated.

With peace and the ideal action, countries can develop the institutions, abilities and competitive sectors that produce opportunities for individuals." With this long-term vision in mind, the report takes a close appearance at the region's potential for commercial policy federal government actions to increase strategic organization activity as a chauffeur of financial growth and job production.

ANSR July GCC PRs 50DR+

Governments in the region have adopted commercial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned business, but the results have actually been blended. 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 very important to also not forget the work needed for long-lasting peace and prosperity," stated.

Assessing Regional Investment Resilience for 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the region prepared directly for the financing occupation. The GCC economy faces a significant contraction this year pending information of the US-Iran arrangement to end the war. We expect energy flows, tourism and financier sentiment to slowly normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim arrangement between the United States and Iran is a significant step towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take time, however the danger of a recession-inducing oil price spike has declined. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months back, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), higher 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 inability to prevent the interruption to regional shipping, war-driven facilities damage and tourism 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% decline forecasted previously. We anticipate Oman and Saudi Arabia to be the least negatively affected by the fallout from the conflict, with both economies continuing to broaden this year.

The financial damage sustained in the last few months is substantial. Saudi GDP data for Q1 showed 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.

Future GCC Economic Forecasts

Aside from Oman, all GCC producers in addition to Iran and Iraq have actually suffered comprehensive oil and gas production losses considering that the start of the conflict. May information reveal regional 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+

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 expect a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Meanwhile, oil prices have actually been unpredictable, easing 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+ allows for a progressive increase in its output towards the 5mn barrel daily production target when trade normalises. Against this backdrop, the UAE will speed up the building and construction of a new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in 3 months, driven largely by improved domestic need. However, they stay listed below long-run averages, with weak export orders and cost pressures from greater product and transportation expenses 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 progressive healing over the remainder of the years.