The economies of Gulf Cooperation Council (GCC) are based on strong foundations that enhance their ability to overcome the fallout of the Middle East war, supported by robust net asset positions and liquidity buffers despite prolonged geopolitical uncertainty, Standard & Poor’s Global Ratings said in a recent report. The rating agency projected a temporary slowdown in GCC growth in 2026 before the region's economies regain strong recovery in 2027, with countries and economic sectors' ability to absorb shocks according to their financial and geographical conditions. In its report “Middle East War: GCC Sensitivity and Sector Vulnerabilities Aren't Homogenous”, S&P said outlooks on GCC sovereign ratings are stable supported by expectation that large, liquid government assets will absorb fiscal shocks and that hydrocarbon exports will resume amid supportive prices “We anticipate a pronounced dip in GDP growth in 2026 followed by a strong recovery, with average real GDP growth of about 5.3% in 2027,” the agency wrote. Gradual recovery of energy supplies S&P Global Ratings' base case assumes that supply disruptions in the Strait of Hormuz will ease in the second half of 2026. “We expect oil shipments during that period will average about 75% of the pre-war volumes and that Brent crude will average $110 per barrel (/bbl) for the remainder of 2026 and $80/bbl for 2027,” the report said. It expected the GCC region's real GDP to fall 3% on average in 2026, with Saudi Arabia (2.6%) and Oman (1.6%) and UAE (1.5%) projected to grow. Ability to recover differs S&P said four of the six GCC sovereigns' net assets exceed annual GDP. It said sovereigns, such as the UAE, Saudi Arabia, Kuwait, and Qatar, display greater capacity for resilience than Bahrain and Oman, though Oman stands to benefit further from its geography outside the Strait of Hormuz. The agency added that Saudi Arabia's and Oman's geographic advantages will likely continue to offer benefits extending beyond hydrocarbons, with maritime and logistical disruption weighing more on other GCC countries' trade, manufacturing, real estate, and hospitality. Oil production exceeds pre-war levels S&P forecasted that between 2027 and 2029, GCC oil production will exceed pre-war levels. During this period, Saudi Arabia's oil production will increase to an average of 10.6 million barrels per day (bpd) while the UAE’s production will increase to 4.5 million bpd. “We expect regional pre-war production levels will be exceeded as Qatar’s North Field East expansion starts producing with the first train expected to come on stream in early 2027,” the report added. Resilience of GCC banks In the banking sector, S&P said despite uneven external risks across the region, “we consider GCC banks' credit quality to be stable, supported by deposit growth that offers funding stability and solid capital buffers that mitigate risks from potentially weaker asset quality.” In the first quarter of 2026, it said total domestic deposits rose by about 4.2% in the GCC region, slightly accelerating to 6.2% year-to date to April-end. Domestic private sector deposit growth remained on par with 2025, at about 11.6% annualized at the end of April 2026, supported by a strong pick-up in Saudi Arabia. In a scenario involving external funding outflows--assuming 50% external bank funding and 30% non-bank funding outflows, the rating agency said some banks would likely require support of about $1.2 billion and $5.8 billion, respectively, based on the first quarter 2026 financial data. Energy and real estate more vulnerable S&P said the conflict will weigh heaviest on sectors reliant on tourism, consumer spending, transportation and logistics and energy. It said regional uncertainty could negatively affect high-net-worth investors' decisions, leading to weak transaction volumes, particularly in the apartments segment given the potential for oversupply. Conversely, utilities, telecommunications, and healthcare continue to demonstrate resilience, supported by defensive business models and relatively stable demand. Redirecting investment S&P said the prolonged geopolitical fragmentation, intermittent regional clashes, and the failure to normalize trade flows through key routes like the Strait of Hormuz would be a sustained erosion of business confidence, investment appetite, and cross-border capital flows. The next phase of GCC corporate credit differentiation will be shaped less by balance sheet strength alone, and more by companies' ability to sustain confidence, investment, and economic diversification amid prolonged uncertainty.
