Key Foreign Investment Prospects for the GCC Region

Threats are tilted to the drawback. In the occasion of a prolonged dispute, the current impacts on the region will be compoundedthrough elevated energy and food costs, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a plain suggestion of the work ahead for the region: not just to weather shocks, however to restore more durable economies with more powerful macroeconomic basics, innovate and enhance governance, buy infrastructure, and enhance employment-creating sectors," stated.

With peace and the ideal action, countries can develop the organizations, abilities and competitive sectors that produce opportunities for people." With this long-term vision in mind, the report takes a close take a look at the area's potential for industrial policy government actions to increase strategic service activity as a motorist of economic growth and job development.

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, however the results have been mixed. The report highlights the crucial need for strong organizations and mindful targeting of policies. "As countries face the heavy toll of today dispute, it is important to likewise not forget the work required for lasting peace and success," said.

2026 Investment Climate of the GCC

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the financing occupation. The GCC economy faces a marked contraction this year pending details of the US-Iran contract to end the war. We expect energy circulations, tourism and investor belief to gradually normalise as war disruptions diminish.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a considerable action 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 rate spike has actually decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted three months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth before the war), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their inability to avoid the interruption to local shipping, war-driven infrastructure 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 projected previously. We anticipate Oman and Saudi Arabia to be the least negatively impacted by the fallout from the conflict, with both economies continuing to expand this year.

The financial damage incurred in the last couple of months is significant. 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 disruption hit late in the quarter.

Positioning Regional Portfolios for 2026 Trends

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered substantial oil and gas production losses because the start of the dispute. Might information reveal regional production nearly halved from pre-war levels, with the decline deepening relative to March and April. Rerouting efforts, consisting of by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have actually assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to contract 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 significantly depressed base. Oil rates have actually been unstable, relieving below $85 per barrel as the interim arrangement was revealed.

In the medium term, we anticipate oil costs to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a progressive boost in its output towards the 5mn barrel each day production target once trade normalises. Against this background, the UAE will accelerate the building and construction of a new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in 3 months, driven mostly by improved domestic need. They remain listed below long-run averages, with weak export orders and price pressures from higher product and transportation 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 years.