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Gulf economies double down on resilience
The conflict in the Middle East is expected to slow Gulf economic growth in the near term, but analysts at trade credit insurer, Atradius say it is unlikely to derail the region’s long-term investment and diversification ambitions, instead prompting Gulf states to accelerate spending on infrastructure, energy security, alternative trade routes and defence systems aimed at protecting critical assets from drone and missile threats.
“The diversification strategies the Gulf states were already pursuing well before the war will now receive even greater emphasis,” says Niels de Hoog, Senior Economist, Atradius. “The conflict is likely to act as a trigger for stronger resilience, putting the restoration of confidence at the top of the agenda, with increased investment in overland infrastructure, alternative ports, and higher defence spending.”
Rather than moving away from hydrocarbons, Gulf countries are building a more balanced growth model. Oil and gas remain key revenue sources, with the UAE’s ADNOC recently announcing US$55 billion in project awards for 2026-2028. At the same time, foreign investment continues to flow into non-oil sectors including finance, logistics, manufacturing and communications.
The UAE remains the region’s leading investment destination, while Saudi Arabia is gaining momentum thanks to major projects along the Red Sea, including NEOM’s industrial hub, Oxagon.
Assuming the Strait of Hormuz gradually reopens after the ceasefire, Atradius’ baseline scenario predicts 2026 to be a difficult year for Gulf economies with Qatar facing a sharp contraction and UAE growth near zero, while Saudi Arabia is set to perform better. The GCC is forecast to shrink by 1.2% in 2026 before rebounding strongly with 7.8% growth in 2027, supported by spare oil capacity, higher oil prices and recovering foreign investment.
Strong fiscal reserves, low debt levels and substantial sovereign wealth funds are expected to help Gulf governments sustain investment through the downturn. As confidence returns, foreign direct investment is also expected to recover, particularly in non-oil sectors.