In the Middle East, political and security conditions rarely serve the economic ambitions of its countries. The region, where armed conflicts stretch across vast areas, has long curbed — and at times obstructed — economic growth.
Even so, GCC countries have managed to push their economies forward, posting strong growth rates in recent years.
Reports by regional and international economic institutions forecast that these economies will maintain positive momentum in 2026, driven by a set of structural factors — most notably the accelerating growth of non-oil activities, economic diversification programs, strong fiscal positions and ample government reserves.
While Gulf Cooperation Council countries have succeeded in sustaining growth despite the fallout from developments in Gaza, Lebanon, Yemen and Ukraine, questions remain about how long this trajectory can be maintained and what underpins it.
Growth Fueled by Economic Diversification
According to the latest World Bank forecasts, GCC countries’ economies are on track to record positive growth rates in 2026, reaching about 4.5%, amid easing inflation and improving macroeconomic indicators.
The projections show that the non-oil sector has become the main engine of economic expansion across GCC countries — particularly in the UAE and Saudi Arabia — after registering notable growth in recent years, with expectations that this performance will continue, supported by policies aimed at stimulating economic activity and investment in non-oil sectors.
Faisal Al-Manawer, dean of the College of Administrative Sciences at Kuwait University, says 2026 is shaping up to be a pivotal year for GCC economies, citing a clear convergence in international institutions’ forecasts pointing to accelerating overall economic growth.
He notes that the most influential factor behind this improvement is the continued strength of non-oil growth, as non-oil sectors gain increasing importance in the economic structures of the GCC countries, fueled by investment in services, construction, logistics, tourism and the financial sector.
Oil has long been the backbone of public revenues in GCC countries, which in recent years have adopted policies aimed at reducing reliance on hydrocarbons and diversifying income sources.
Heavy dependence on oil carries significant risks for these economies, including price volatility, wars, security conditions and fluctuations in global demand.
Al-Manawer stresses that oil still plays a role in supporting GDP growth in GCC countries, but within a more balanced framework. Gradual easing of production constraints and rising export levels, he says, could allow oil to support growth rather than remain its sole driver, as was the case in the past.
He adds that stable inflation and lower borrowing costs are boosting domestic demand and expanding private investment, while fiscal flexibility and sovereign reserves give GCC governments greater room to sustain development spending.
For his part, economic analyst Jamal Bannon says the key indicator at this stage is not merely high growth rates, but the quality and sustainability of that growth over the medium term.
Reports by international institutions, he says, clearly show rising foreign direct investment flows and the expansion of vital sectors such as tourism and logistics, reflecting a genuine shift in the structure of GCC countries’ economies.
“The growth of non-oil sectors in countries such as Saudi Arabia and the UAE has become a protective shield for GCC economies,” Bannon says, noting that it provides greater insulation from volatility in global energy markets and reshapes the growth model toward knowledge-based, services- and industry-driven economies.
The Risk of a New Conflict
In the event of a direct military confrontation between Israel and Iran, GCC economies would face a serious test, experts say, even if oil prices were to rise temporarily.
Al-Manawer argues that any short-term financial gains from higher oil prices in such a scenario would not tell the full story, as they are often accompanied by slower non-oil activity and higher uncertainty, weighing on trade, investment and supply chains.
Regional conflict, he says, leads to a repricing of risk across the region, prompting investors to hold back, raising financing and insurance costs, and affecting foreign direct investment decisions.
Oil-dependent economies have historically experienced volatility during periods of armed conflict worldwide. In the Middle East, wars and security instability have also pushed GCC countries to increase government spending on security and defense, often at the expense of some development programs.
To preserve economic growth, Al-Manawer says GCC countries must maintain balanced international relations and continue their reform and economic transformation agendas without hesitation.
“The more GCC countries succeed in decoupling the pace of development from both political and oil-related volatility,” he says, “the lower the risks and the stronger market confidence will be — even in a turbulent regional environment.”
Sukina Ali
A Saudi writer, researcher, and TV presenter
