GCC: Navigating a new reality GEMs Equity Strategy

Research evidence excerpt

GCC: Navigating a new reality GEMs Equity Strategy

Equity Strategy ● Emerging Markets

14 May 2026

Executive Summary

The Middle East conflict and Strait of Hormuz closure represent

the GCC’s largest macro shock in a generation, driving a clear

divergence in regional equities as investors price uneven

economic exposure. Saudi Arabia is relatively insulated by Red

Sea export access via the East-West pipeline and Yanbu,

supporting continued growth and firmer earnings expectations.

The UAE faces challenges given its reliance of tourism and expats,

while Qatar and Kuwait remain constrained by limited alternative

export routes. Despite the scale of the shock, markets have been

supported by strong fiscal positions, sizeable sovereign wealth

resources, and structurally light foreign ownership, which has

limited outflows. Despite being among the most exposed to

regional tensions, the UAE could deliver the strongest longer-term

recovery if escalation is avoided, as policymakers accelerate

investment to support growth. Saudi Arabia presents the opposite

setup and valuations look rich; we downgrade the market to

neutral. Preference: UAE > Saudi > Kuwait > Qatar.

The Middle East conflict and Strait of Hormuz closure represent the largest macro shock the

GCC has faced in a generation. Regional equity markets have diverged sharply in response.

Saudi Arabia and Kuwait are now 2% and 0.5% above pre-conflict levels, while the UAE and

Qatar sit 15% and 8% below.

The divergence reflects the uneven impact of the Hormuz closure across GCC economies.

Saudi Arabia retains Red Sea access through the East-West pipeline (5m b/d nameplate

capacity) and Yanbu terminals, supporting c60% of normal export volumes. The UAE has