Saudi Arabia, Oman will be the GCC's only growing economies in 2026 -ICAEW

Saudi Arabia and Oman will be the only two GCC economies to keep growing in 2026, as the fallout from the US-Iran war drags the bloc into a 2.4% GDP contraction, the ICAEW said in its Economic Update. That's a sharp downgrade from the 0.2% contraction it forecast three months ago, and a reversal of the 3.6% expansion the wider Middle East was tracking before the war. The region is now seen shrinking 4.1%.

REMEMBER- The war shock has hit Saudi almost entirely through oil. The Kingdom’s economy saw the slowest expansion since 2Q 2024, up by 3% y-o-y in 1Q 2026, with oil activities being the primary drag on performance. However, analysts have noted that this downturn was mitigated more effectively than anticipated, thanks to strategic rerouting initiatives and the East-West pipeline.

Food inflation is staying contained: CPI inched up just 1.8% in May, and ICAEW expects food inflation to stay subdued, citing the Kingdom's larger domestic production base and supply-chain resilience. That comes in contrast to the food-driven price pressure building in Kuwait, Oman and Qatar.

MEANWHILE- GCC oil output faces its steepest decline in decades, down 14.5% this year on the shipping disruption, before a 23.5% rebound in 2027 off a depressed base. ICAEW sees Brent averaging USD 90 / bbl this year, easing over the medium term as the UAE's exit from Opec+ and a planned West-East pipeline set to double export capacity through Fujairah. Inbound tourist arrivals across the GCC are forecast to fall 30% as security concerns reshape booking and destination decisions.

What's next: ICAEW pegs the recovery to the Strait reopening to normal transit, which it expects to come slowly. It sees GCC headline inflation at 2.6% y-o-y in 2026, easing to 2.1% in 2027 as supply-side pressures fade. The Fed is expected to hold rates until December, with regional central banks following the lead.