Corporate profitability across the Gulf Cooperation Council (GCC) is expected to come under pressure through the end of 2026 as the prolonged Middle East conflict drives up logistics costs, weakens business confidence and delays investment, according to a new report by S&P Global Ratings.
The ratings agency said the risks facing GCC companies are becoming increasingly uneven, with the focus shifting from immediate operational disruption to longer-term uncertainty that could slow the region's economic recovery to pre-war levels.
"We expect profitability across almost all sectors will decline in 2026 owing to higher logistics costs," S&P said, adding that companies are also likely to scale back discretionary capital expenditure while capital market debt issuance declines.
The report said defensive sectors such as utilities and telecommunications are expected to remain relatively resilient. However, industries with greater exposure to the conflict and the disruption to shipping through the Strait of Hormuz are already facing mounting credit pressures.
These include hospitality, aviation, real estate, transport and logistics, consumer discretionary and energy, where weaker business confidence and delayed investment are expected to intensify if geopolitical uncertainty persists.
S&P said that in its downside scenario, nearly all GCC corporate sectors would face severe challenges. Credit quality would depend not only on companies' financial strength but also on their ability to maintain investor confidence, continue investing and overcome supply chain and logistics bottlenecks.
Base-case scenario
Under its base-case scenario, S&P expects supply disruptions in the Strait of Hormuz to ease during the second half of 2026, with oil shipments recovering to about 75% of pre-war volumes. It forecasts Brent crude to average $110 a barrel for the remainder of 2026 before easing to $80 a barrel in 2027.
Even under this scenario, the agency expects the GCC economy to contract by an average of 3% in 2026, although Saudi Arabia, the UAE and Oman are projected to post positive growth of 2.6%, 1.5% and 1.6%, respectively.
In a more adverse scenario involving intermittent conflict or renewed war over several years, S&P warned that trade disruptions could become structural, leading to a lasting erosion of supply chains and business confidence.
Such a scenario could push oil prices well above the agency's base-case assumptions during periods of severe disruption, while a global economic slowdown could reduce oil demand by about 10% by 2027 compared with 2025 levels. Persistent supply shortages and elevated inflation could also force central banks to maintain tighter monetary policy for longer, further weighing on economic activity across the region. - TradeArabia News Service
