Macro & Markets: GCC - Saudi Arabia Outlook - January 2026

Executive Summary

The S&P GCC index declined by 1.5% in 2025. All GCC equity market indices, except Saudi Arabia, registered broad-based gains in 2025 led by Oman (+28.2%), Kuwait (+21.0%) and Dubai (+17.2%). Saudi Arabia delivered its worst performance in nearly ten years at -12.8% in 2025. Saudi’s sector concentration is titled in favor of energy and financials. Saudi Aramco delivered -15.0% returns during the year. Banking stocks like SNB and Al Rajhi ended the year in green. Ma’aden delivered a strong 21.2% return in 2025. As we step into 2026, this report presents our outlook for Saudi Arabia’s Tadawul All-Share Index (TASI) using a three-factor framework encompassing economic fundamentals, earnings growth potential and valuation attractiveness. Despite strong Real GDP growth expectation, twin current account and fiscal deficits dampen the economic outlook for KSA in 2026. Driven by strengthening domestic demand, corporate earnings are forecasted to grow by 4.1% in 2026 which is an improvement over the recent years. Recent market correction has resulted in lower P/E ratios and high dividend yields, which makes the Saudi Equity market attractive in terms of valuation. Overall, our outlook for KSA’s Tadawul All-Share Index for 2026 is neutral. In terms of sectoral performance, while the outlook for energy sector is negative, financials, technology and utilities are expected to see strong earnings growth and offset losses caused by energy stocks. Potential easing of foreign ownership limits may bring emerging market fund flows, especially to banking stocks.