JPMorgan has scaled back its near-term outlook for non-oil growth across the Gulf Cooperation Council - the bloc that includes Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain - in response to heightened regional risk following the latest Middle East escalation.
In a note published Monday, strategists led by Nicolaie Alexandru-Chidesciuc said the U.S. and Israeli attack on Iran has amplified uncertainty across the region and that the main global channels through which the fallout could work are oil markets and investor sentiment. While global effects might be short-lived, the team cautioned that elevated uncertainty in the Gulf is likely to persist and exert a drag on activity.
JPMorgan describes the GCC as the most exposed part of the EMEA emerging market universe and said it has made only limited forecast changes so far but has already reduced near-term expectations for non-oil activity.
"We mark down 2026 non-oil GDP growth in the GCC by 0.3%pts because of the negative impact in the current quarter, with risks for larger revisions," the strategists wrote, underlining the potential for further downgrades if conditions deteriorate.
The bank's downgrade reflects expectations that business disruptions and weaker confidence will hit the region's population and commercial centers. The note said economic life has slowed sharply in major hubs close to Iran - specifically naming Manama, Doha, Abu Dhabi and Dubai - creating downside risks to services and wider non-oil activity in the near term.
JPMorgan had estimated non-oil growth in the Gulf at 4.3% for 2025 and maintained a 2026 baseline of 3.5% before the recent escalation. Following the new tensions, the strategists warned that non-oil activity faces "meaningful downside risks from potentially protracted business disruptions and lower business and consumer confidence."
The bank also pointed to reports of strikes in Dubai and Abu Dhabi, noting these are likely to weigh on activity and could lead to reductions in tourism, a sector the note describes as one of the region's key engines of growth.
JPMorgan applied country-level adjustments to its non-oil growth forecasts: Bahrain was cut by 0.5 percentage points; the United Arab Emirates by 0.4 points; Qatar by 0.3 points; and both Saudi Arabia and Kuwait by 0.2 points. Oman’s non-oil forecast was left unchanged.
Looking beyond the immediate impact, the strategists warned that a sustained period of instability could weaken appetite for foreign direct investment and potentially undermine long-running efforts across the Gulf to diversify economic activity away from hydrocarbons.
In sum, JPMorgan’s note frames the recent military escalation as a near-term shock to confidence and commercial activity in the Gulf, with the potential to spill over into investment and diversification plans if the period of instability continues.
Key points
- JPMorgan cuts 2026 GCC non-oil GDP growth by 0.3 percentage points, citing heightened regional risk and current-quarter impacts.
- Country-level downgrades: Bahrain -0.5 pts, UAE -0.4 pts, Qatar -0.3 pts, Saudi Arabia and Kuwait -0.2 pts; Oman unchanged.
- Major hubs close to Iran - Manama, Doha, Abu Dhabi and Dubai - have seen sharp slowdowns, putting services and tourism at risk.
Risks and uncertainties
- Protracted business disruptions - could depress activity in services, tourism and other non-oil sectors if instability continues.
- Weaker foreign direct investment - ongoing instability may dampen FDI, threatening diversification and long-term investment projects.
- Deterioration in business and consumer confidence - sustained sentiment declines could further reduce non-oil growth across the Gulf.