JPMorgan Downgrades Non-Oil Growth Outlook for Gulf Economies as Middle East Conflict Continues to Escalate

Investing.com - JPMorgan has downgraded the 2026 non-oil growth outlook for the Gulf Cooperation Council (GCC) economies—Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain—citing rising regional risks following recent escalations in Middle East tensions.

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The attacks by the US and Israel on Iran have heightened uncertainty across the region, with oil and market sentiment becoming the main channels of global impact. Although the global effects may be temporary, JPMorgan strategists warn that regional uncertainty could persist and weigh on economic activity.

Against this backdrop, JPMorgan considers the GCC to be the region with the greatest risk exposure among emerging markets in Europe, the Middle East, and Africa. Strategists say they are “currently making limited forecast adjustments,” but have begun to lower short-term expectations for non-oil activities.

“Due to negative impacts this quarter, we have downgraded the GCC’s 2026 non-oil GDP growth forecast by 0.3 percentage points, with a greater downward revision risk,” said the team led by Nicolaie Alexandru-Chidesciuc in a Monday report.

This downgrade reflects expectations that disruptions to business activity and weakened confidence will pressure major population and commercial centers in the region.

The report notes that in key hub cities near Iran—including Manama, Doha, Abu Dhabi, and Dubai—economic activity has slowed significantly, intensifying near-term downside risks for the service sector and broader non-oil activities.

In recent years, non-oil growth in the Gulf region has been strong, with JPMorgan estimating a 4.3% increase in 2025, up from a baseline forecast of 3.5% for 2026.

However, following recent escalations, “non-oil activities face significant downside risks from potential long-term disruptions to business and declines in business and consumer confidence,” the strategists said.

Reports of attacks on Dubai and Abu Dhabi could hamper economic activity, and tourism—one of the region’s key growth engines—may decline, they added.

By country, JPMorgan has downgraded Bahrain’s non-oil growth forecast by 0.5 percentage points, the UAE by 0.4 points, Qatar by 0.3 points, and both Saudi Arabia and Kuwait by 0.2 points, while Oman remains unchanged.

Beyond immediate impacts, strategists warn that prospects for investment and diversification efforts could also be affected.

If instability persists, foreign direct investment (FDI) appetite may weaken, potentially undermining the Gulf economies’ long-standing diversification efforts away from hydrocarbons.

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