The GCC economies are projected to rebound strongly with real GDP growth of 6.8 per cent in 2027, driven by a recovery in energy exports and resilient non-oil growth.
According to a research briefing by Oxford Economics, the expected expansion follows a projected contraction of 5.4pc in 2026 due to regional war disruptions and Strait of Hormuz shipping blockades.
The baseline forecast envisages aggregate regional GDP returning to its pre-conflict peak by mid-2027.
“We expect geopolitical uncertainty to remain high as the US-Israel war with Iran continues,” said Oxford Economics head of GCC macroeconomic analysis Azad Zangana.
“Shipping flows through the Strait of Hormuz should improve as both sides of the conflict suffer economically from the blockades. However, we see periods of disruption becoming the norm over the next few years.”
Saudi Arabia’s economy is forecast to grow by 6.4pc in 2027 following a 2.3pc contraction in 2026, while the UAE is expected to record 6.6pc growth.
Hydrocarbon GDP across the GCC is expected to rebound by 21.7pc in 2027 after contracting 24.2pc in 2026, accounting for roughly 70pc of total economic growth next year.
Aggregate government revenues are projected to rise by 13.4pc.
Despite the temporary disruption to trade routes, inflation pressures are expected to moderate.
Annual GCC consumer price index (CPI) inflation is forecast to ease to 1.8pc in 2027, down from 2.2pc in 2026, as supply chain bottlenecks clear.
While non-oil domestic consumer activity remains resilient, travel and tourism will take longer to recover fully, with Oxford Economics forecasting a complete sector recovery delayed until 2028 due to advanced holiday booking cycles.
Regional central banks are expected to maintain ample liquidity to support banking systems while continuing to track US Federal Reserve interest rate policy, with further monetary easing anticipated by late 2027.
Money supply data showed Bahrain experienced improved liquidity, supported by regional partners.
Mr Zangana noted that GCC governments will likely focus fiscal policy on economic diversification and security.
Regional nations are expected to reprioritise spending towards local needs such as healthcare, education, and new infrastructure projects, including alternative pipelines through Oman to diversify export routes and protect critical assets.
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