Gulf economies are expected to grow significantly in 2027 after suffering an economic slowdown in recent months caused by the Iran-US conflict. 

The GCC (Gulf Cooperation Council) economies are expected to grow by 8.1% next year, with energy flows, tourism and investor sentiment to gradually normalise as war disruptions subside, the Institute of Chartered Accountants in England and Wales (ICAEW) and Oxford Economics said in a new report. 

Regional economies incurred substantial economic damage as the conflict's shockwaves, whether through missile strikes on critical energy and oil architecture, disrupted shipping lanes, or upended trade and aviation networks, swept through markets, industries and countries. 

Saudi Arabia’s national output for the first quarter slowed to 3% year on year and non-oil activities expanded at its slowest pace since the Covid-19 pandemic. The kingdom’s seasonally adjusted GDP contracted 1.2% quarter-on-quarter driven by a 6.8% fall in oil activities as the Strait of Hormuz disruption hit late in the quarter, the Middle East's economic update revealed. 

Barring Oman, all GCC producers alongside Iran and Iraq, have suffered extensive energy production losses, with overall production having dipped to half of pre-war levels. Decoupling efforts, including Saudi Arabia's East-West Pipeline and the UAE's Habshan-Fujairah pipeline, have helped prevent an even larger plunge in output. 

Meanwhile, economies such as Kuwait, Iran, Iraq and Qatar, bore the brunt of the conflict, for their inability to avoid the disruption to regional shipping, war-driven infrastructure damage and tourism losses. 

“We forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in several decades. We then expect a 23.5% rebound next year, driven largely by normalisation from a severely depressed base,” the report added. 

Non-oil activity in Saudi Arabia and the UAE, however, appears on a rebound with May PMI surveys reporting the strongest output levels in three months, driven by improved domestic demand. 

“Overall, we expect a 1.1% contraction in GCC non-energy sectors this year - compared to 4.2% growth pre-war - and a gradual recovery over the rest of the decade,” the study stated. 

The Middle East is expected to contract 4.1% this year, surpassing the downturn witnessed during the first year of the Covid-19 pandemic, according to the study. Iran’s GDP is likely to shrink by 10.8% this year, while Iraq’s economy is estimated to contract further by around 22% in 2026, with a sharp 33% rebound in 2027 as oil exports normalise. Lebanon faces a 6.5% contraction in 2026 amid ongoing Israeli strikes, occupation in the south of the country and forced displacement of 20-25% of the population, the report added. 

“By contrast, Syria continues to reintegrate into the global economy after more than a decade of civil war. We anticipate GDP growth to average 9.6% over 2026-2027, supported by renewed investment,” the study said. 

Oil prices have risen around 10-12% since the conflict began on February 28, hitting a year-high peak of $115 in late March before easing to around $86 on June 12. Brent prices stood at $78.5 at 11.27pm GMT time on June 18.  

“In our baseline forecast, we expect oil prices to remain above pre-war levels as exports gradually normalise, with Brent oil price averaging around $90 per barrel this year. In the medium term, we expect oil prices to be slightly lower than our pre-war baseline, as the UAE’s departure from OPEC+ allows for a gradual increase in its output towards the 5mn barrel per day production target once trade normalises,” the study adds. 

Türkiye has announced its new artificial intelligence plan under which it aims to increase its national data centre capacity to one gigawatt by the end of the decade. 

The country will mobilize at least $10 billion in private-sector investment for data centres, cloud computing, and AI infrastructure under the new plan, Turkish President Tayypi Erdogan announced at the Türkiye Artificial Intelligence Summit held in Istanbul last week. 

The AI action plan is grounded in four key pillars – discover, benefit, produce and govern – with four complementary actions under each pillar. 

Pursuant to the plan, the government aims to train 10,000 advanced AI specialists, 100,000 AI application professionals, and dedicate at least 2% of public investment programs to AI projects. AI literacy workshops will be launched in all 81 provinces to train five million citizens within two years.

The premier also announced plans to make at least 2,000 public datasets available to citizens through a National Data Library, including data from sectors such as health, agriculture, defense, and e-commerce.

“We will launch the National Artificial Intelligence Literacy Program to ensure that people of all ages understand artificial intelligence correctly and use it safely,” Erdogan said.

Turkiye has launched a national technology initiative, via which it is looking to build and own its own tech models.

The beta version of Turkiye’s first open-source national large language model (LLM), T3AI, was launched last year. The government introduced BILGE, its latest LLM to the audience at the AI summit.  

The country also unveiled a $1.26-million- initiative last year to develop Turkish LLMs to advance homegrown navigation and mapping technologies.

Vietnam has introduced its first comprehensive legal framework for halal products and services, with Decree 127 taking effect on June 1, establishing rules on certification, labelling, and traceability in a move aimed at expanding the country's halal exports and also attracting Muslim tourists.

The decree, issued in April, requires companies to register with the Ministry of Science and Technology before conducting halal training, consultancy, or certification, and strengthens labelling requirements so halal products are clearly identified on packaging.

The framework is being paired with institutional support for exporters. The HalalViet Promotion and Experience Centre, recently launched in Hanoi, plans to represent Vietnamese businesses at halal trade expos in Indonesia, Malaysia, and Turkiye.

"We are working with experts to support domestic businesses, helping them not only achieve halal certification but also better understand market needs and develop products that meet actual consumer demand," a centre representative said.

The regulation addresses longstanding inconsistency in the sector, where suppliers and customers often applied differing interpretations of halal standards, making it difficult for food businesses to source certified ingredients. The decree provides a single framework for all participants in the halal value chain.

Vietnam's halal exports were valued at more than $700 million according to figures cited by the Department of Vietnam Customs, though estimates vary depending on how halal trade is defined.

With the new framework covering food, beverages, and tourism services, Vietnam is positioning itself to compete in the growing global halal market.

Türkiye and Saudi Arabia have signed two preliminary agreements to foster cooperation in logistics and drive regional connectivity. 

The two memorandums of understanding signed by Saudi and Turkish transport ministers will facilitate the construction of logistics centres and encourage joint initiatives across all facets of the railway sector. 

Transport volumes between Türkiye and Saudi Arabia hovered around 20,000 prior to 2012. 

“Although we currently fall short of that figure due to regional developments, our goal is to take our cooperation beyond even that level,” state-owned Anadolu Agency quoted Turkish transport and infrastructure minister Abdulkadir Uraloglu as saying.

Türkiye plans to modernize the historic Hejaz Railway and extend it to Oman to create an alternative global trade route to the Strait of Hormuz as well as for tourism purposes, according to Uraloglu.

The Hejaz Railway was originally built between 1900 and 1908, stretching about 1,322 kilometers between Damascus in Syria and Medina in Saudi Arabia. It was later expanded to nearly 1,900 kilometers with additional lines. 

Türkiye inked agreements with Syria and Jordan in April to modernize their railway systems with the eventual aim to create a Southern Europe-Persian Gulf transport corridor. The network was expected to take four to five years to build, Turkish transport minister had said at the time.

The initial stage involves connecting Türkiye to Aleppo, utilizing the existing Aleppo-Damascus-Jordan network, passing through Saudi cities of Medina and Makkah, with Oman as its final destination. 

Türkiye and Saudi Arabia are monitoring developments on the Syria-Jordan-Iraq routes, Uraloglu said at the recent signing. “Two test runs starting from Türkiye through Iraq and extending to Saudi Arabia have clearly demonstrated the feasibility of this route."

The road project extending from Iraq’s Basra Gulf to the Turkish border is also underway, with its design phase complete. The corridor, which includes highways, railways, energy, and communication lines, will be realized through international funding in partnership with the UAE, Qatar, Iraq, and Türkiye, according to the media body. 

The construction of new and revival of old or damaged transport projects is key to establishing regional connectivity. Last month, Lebanon launched a tender process for a railway rehabilitation project linking the northern city of Tripoli with the Abboudiyeh area on the Lebanon-Syria border. 

Türkiye restored a strategic 350-kilometer railway along the Syrian border to freight traffic in April, after its first comprehensive rehabilitation in over a decade.  
 

Dubai's office market posted a sharp rise in activity in the first quarter of 2026, with transaction values more than tripling year-on-year to AED8.2 billion ($2.2 billion) across roughly 1,600 deals, even as regional tensions weighed on volumes in March.

Sales prices climbed nearly 25% year on year, and rents rose around 20%, driven in part by strong demand for off-plan offices, a segment that had barely registered before this year. Al Sufouh 1, Business Bay and Jumeirah Lakes Towers accounted for the bulk of activity, with the top five locations representing over 70% of all first-quarter transactions.

January and February drove the bulk of deal volumes, accounting for more than four-fifths of the quarter's activity. March saw a year-on-year dip of over 10%, with ready transactions falling by nearly two-thirds as regional tensions escalated following the outbreak of the Iran conflict on February 28.

Commercial real estate data for April and May shows transaction volumes broadly flat year on year at around 900, though prices continued to climb with the median rising by three-quarters to approximately AED3.2 million and the per-square-foot rate more than doubling to AED3,600.

Company formation figures point to sustained occupier demand. Dubai International Financial Centre registered 775 new companies in the first quarter, with March its strongest month, up nearly 60% year on year. Abu Dhabi Global Market reported a 5% year-on-year rise in company registrations in March.

Chinese electric vehicle maker BYD has suspended plans for a $1 billion factory in Turkiye, opting instead to expand production capacity in Hungary as EU tariffs make European manufacturing more cost-effective than importing from nearby markets.

The company has put on hold a proposed plant in the Aegean province of Manisa, announced in mid-2024 and intended to produce 150,000 electric and hybrid vehicles annually, with its first compact EV now set to come off a Hungarian assembly line by year-end.

The move deals a significant blow to Turkiye's automotive ambitions. "There would have been benefits for supply chains, jobs, research and development, battery production, side industries as well as AI, so many diverse contributions," said Anıl Şentürk, chair of the automotive committee at the Istanbul Chamber of Commerce. "This was a direct foreign investment, so its contribution would not only have been to the automotive sector but the country's economy itself."

The Manisa facility, when fully operational, would have employed 5,000 people, with most of its output destined for export. The project's suspension follows rising EU tariffs on imported electric and hybrid vehicles, which undermined the cost case for building in Turkiye rather than within the bloc. BYD is also in discussions to take on space at an existing plant in Germany.

The suspension carries additional risks for BYD in Turkiye. The Turkish government granted the company an exemption on most import tariffs in exchange for the investment commitment, an arrangement that helped BYD capture a 24% share of EV and hybrid sales in the country last year. Halting or cancelling the Manisa plant could expose the company to legal action and the loss of those trade advantages.

"If the decision is final, BYD is most likely to be stripped of their advantages in the local market and potentially lose this market to other Chinese competitors or European models," Şentürk said.

BYD has not ruled out returning to Turkey at a later date.