Following a contraction in 2026 due to regional conflict weighing on energy exports, tourism, and investor sentiment, the GCC economies are projected to rebound strongly next year, according to a report by the Institute of Chartered Accountants in England and Wales (ICAEW) and Oxford Economics. The Economic Insight: Middle East Q2 2026 report forecasts that the six-nation bloc’s GDP will expand by 8.1% in 2027 as business confidence rebuilds, travel demand returns, and energy trade routes return to normal. This recovery aligns with the report’s baseline scenario, which anticipates the United States and Iran signing a formal peace pact on June 19.
The economic downturn experienced this year directly reflects major disruptions to energy production and trade flows. Output in the GCC oil sector is projected to fall by 14.5% in 2026, marking its steepest decline in several decades. However, a robust 23.5% bounce-back is forecast for 2027 as production recovers from this heavily depressed baseline. Among the member states, Saudi Arabia and Oman are expected to see the mildest negative impacts, with both economies continuing to expand this year. Saudi Arabia and the UAE have also managed to cushion the blow compared to peer producers by rerouting a portion of their exports through alternative pipelines. Meanwhile, the report adjusted its forecast for average Brent crude oil prices to $90 per barrel for 2026, down slightly from the $90.2 predicted three months prior.
The non-energy segments of the GCC are expected to shrink by 1.1% in 2026 before entering a recovery phase in 2027 and beyond. The tourism sector took a heavy hit, with inbound arrivals projected to plunge by roughly 30% in 2026, resulting in tens of millions of fewer visitors and tens of billions of dollars in forfeited regional spending. Given how sensitive travel demand is to accessibility and consumer confidence, this sector’s recovery is anticipated to take longer than energy, though medium-term confidence in regional tourism growth remains stable.
Significantly, the report does not anticipate any permanent degradation to the GCC region’s strong credit profiles, expecting Gulf sovereigns and government-affiliated entities to return to international debt markets as the conflict resolves. Furthermore, despite supply disruptions caused by the war with Iran, inflationary pressures have remained relatively contained across the region. GCC consumer price index (CPI) inflation is forecast to average 2.6% in 2026, driven primarily by rising food prices. These price pressures are viewed as largely temporary, with average inflation expected to cool to 2.1% in 2027 as transitory supply-side bottlenecks clear.
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