Saudi Arabia, Oman will be the GCC’s only growing economies in 2026

Saudi Arabia and Oman will be the only two GCC economies to keep growing in 2026. The rest of the bloc is heading into a 2.4% contraction as the US-Iran war reshapes oil flows and trade, 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%.

In Saudi Arabia, oil is taking the hit while the rest holds: The Kingdom posted 3% y-o-ygrowth in 1Q 2026 — its slowest since 2Q 2024 — with oil being the primary drag, though strategic rerouting and the East-West pipeline cushioned the downturn. Food inflation has stayed contained, as CPI inched up 1.8% in May, in contrast to pressure building in Kuwait, Oman, and Qatar.

Oman, the other outlier: The IMF backed up ICAEW’s forecast, saying in a statement it expects Oman’s economy will grow 3.7% this year before cooling to 3% in 2027. The Fund expects higher oil production to do the heavy lifting. Non-hydrocarbon growth is set to ease to 2.5% in 2026 as the conflict hits tourism and construction, then rebound to 3.2% in 2027. Fiscal and external positions are strengthening — after narrowing to 0.6% of GDP in 2025 on lower oil prices and higher capital spending, the fiscal surplus is projected to widen to 4.5% of GDP in 2026 and 4.2% in 2027.

The oil shock, in numbers: 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.