Driving Economic Success through Strategic Diversification

Home rates have actually come under pressure after a duration of strong development, with recent information from the Dubai Land Department revealing a drop in home mortgage transactions and money sales. However, we think the danger of an enduring migrant outflow and an extreme recession in the property sector is low.

As an enduring US-Iran deal takes shape, the fallout from the dispute has tightened regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. A lot of GCC sovereigns bring reasonably little financial obligation and funding risks are therefore limited in the UAE, the reserve bank's liquidity management has actually alleviated instant issues.

That stated, Bahrain has actually had the ability to count on assistance from neighbours, including Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the region given that the war began. High-frequency financial data highlight the strain on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Key International Investment Avenues for the GCC Market

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil profits and a surge in spending, particularly on aids, showing contingency expenses tied to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas income to a halt, swelling the budget deficit to the largest since 2017.

GCC inflation dynamics stay uneven, with food prices the main source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly subdued in Saudi Arabia, likely reflecting the mitigating impact of its bigger domestic food production base and higher supply-chain strength.

We continue to see price pressures as largely temporal instead of a sign of a continual inflationary cycle. Accordingly, we expect typical inflation to reduce to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume gradually, we expect the US Federal Reserve to keep rate of interest on hold until December, and local rate policies to do the same.

We anticipate Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which offer essential income and FX inflows, have been reduced by the United States marine blockade, while non-oil activity has actually been severely struck. In Iraq, oil exports have collapsed to a trickle and we're forecasting GDP to contract by around 22% this year, with a sharp 33% rebound in 2027 as oil exports normalise.

By contrast, Syria continues to reintegrate into the worldwide economy after more than a decade of civil war. We anticipate GDP development to typical 9.6% over 2026-2027, supported by renewed financial investment, particularly in banking and energy, financial reforms, and the gradual resuming of regional trade links.

GCC Stock Market Patterns in 2026

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, stating total GDP growth in the area is expected to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and destruction of energy and public infrastructure, had interfered with markets, increased monetary volatility, and deteriorated the 2026 development outlook, the World Bank Group stated in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.

The April 2026 World Bank's Macro Hardship Outlook anticipates that the region's aggregate (omitting the Iran) GDP development will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has actually been downgraded by 2.4 portion points because the January forecasts, showing the unfavorable effects of the ongoing conflict.

Saudi Arabia: Projection was devalued by 1.2 percentage points given that January. Development is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook stays the strongest amongst Gulf economies. United Arab Emirates: Development forecast for the UAE has actually fallen by 2.7 percentage points because January.

Qatar: Notably, development forecast for the Qatari economy has seen a sharp decline of 11.0 portion points because January. The economy is now anticipated to record a contraction of 5.7%, down from an approximated development of 5.3%, due to extreme blockage to melted gas products. Qatar is a crucial gamer in the worldwide energy market, with a worldwide market share of melted natural gas (LNG) products varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would mean a total shutdown of the nation's financial lifeline, immediately stopping revenue inflows to the state budget. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 portion points considering that January.