JPMorgan has lowered its growth projections for non oil sectors across Gulf Cooperation Council economies, citing rising uncertainty linked to the expanding conflict involving Iran. The Wall Street bank warned that risks remain elevated and further downward revisions are possible depending on how the situation unfolds.
The bank trimmed its aggregate non oil growth forecast for the GCC by 0.3 percentage points for the current year. Among the bloc’s members, Bahrain and the United Arab Emirates experienced the largest downgrades, with expected non oil growth reduced by 0.5 percentage points and 0.4 percentage points respectively. The adjustment reflects concerns that geopolitical instability could weigh on investment flows, tourism activity and broader business sentiment.
Non oil sectors have been central to diversification efforts across the Gulf region, particularly in the UAE and Saudi Arabia, where governments have invested heavily in tourism, logistics, technology and financial services. Heightened regional tensions, however, risk slowing private sector momentum and delaying project implementation if investor confidence weakens.
Analysts at JPMorgan noted that the outlook will depend heavily on the duration and intensity of the conflict. A prolonged period of instability could affect cross border trade, aviation networks and capital markets, all of which play an important role in supporting non oil economic expansion in the Gulf.
Financial markets across the region have already shown signs of stress. Equity indices in several Gulf states have experienced volatility, while dollar denominated bonds have faced selling pressure amid broader risk aversion. Although higher oil prices may provide fiscal support to hydrocarbon exporters, the indirect effects on domestic demand and services sectors could offset some of those gains.
JPMorgan also revised expectations beyond the Gulf. The bank said it no longer anticipates a rate cut by Turkey’s central bank at its March meeting, citing increased geopolitical risk and potential currency pressures. Its forecast for Turkey’s end 2026 policy rate was raised to 31 percent from 30 percent, while projected inflation was lifted to 25 percent from 24 percent.
In Israel, the bank suggested that monetary easing is also unlikely in the near term given the country’s direct involvement in the conflict. Elevated security spending and economic disruption may complicate policy decisions for the Bank of Israel.
The broader regional picture reflects a complex balance. Elevated oil prices can strengthen fiscal positions for energy exporters, but sustained volatility may dampen tourism, foreign direct investment and business activity. Gulf economies have spent years building resilience through diversification and financial buffers, yet the evolving geopolitical landscape introduces new uncertainty.
Investors and policymakers are closely monitoring developments, particularly their impact on capital flows, currency stability and inflation trends. As the conflict continues to influence market dynamics, economic forecasts for the GCC and neighboring economies remain subject to rapid change.
