Driving Non-Oil Growth via Strategic Diversification

Residential or commercial property costs have actually come under pressure after a period of strong development, with recent information from the Dubai Land Department revealing a drop in home loan deals and cash sales. We believe the risk of a lasting migrant outflow and a serious decline in the real estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened local financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor belief. Most GCC sovereigns carry reasonably little financial obligation and funding risks are therefore restricted in the UAE, the central bank's liquidity management has actually reduced instant issues.

That stated, Bahrain has actually been able to rely on support from neighbours, consisting of Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the very first offering from the area considering that the war started. High-frequency fiscal information underscore the pressure on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Future-Proofing Regional Investments against 2026 Shifts

In Saudi Arabia, the budget plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil revenue and a surge in costs, especially on subsidies, showing contingency expenses connected to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a halt, swelling the deficit spending to the biggest considering that 2017.

GCC inflation characteristics stay irregular, with food costs the primary source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly controlled in Saudi Arabia, most likely reflecting the mitigating result of its bigger domestic food production base and higher supply-chain resilience.

We continue to view rate pressures as mainly transitory instead of indicative of a sustained inflationary cycle. Appropriately, we anticipate typical inflation to ease to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we anticipate the United States Federal Reserve to keep rates of interest on hold up until December, and regional rate policies to follow suit.

We expect Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which offer necessary revenue and FX inflows, have actually been reduced by the United States naval blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have actually collapsed to a trickle and we're forecasting GDP to agreement 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 years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, monetary reforms, and the steady resuming of local trade links.

Essential Stock Capital Strategies for Regional Growth

The World Bank has slashed its 2026 development forecast for Middle East economies, stating general GDP growth in the region is expected to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and destruction of energy and public facilities, had actually disrupted markets, increased financial volatility, and damaged the 2026 development outlook, the World Bank Group said in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.

The April 2026 World Bank's Macro Poverty Outlook forecasts that the region's aggregate (excluding the Iran) GDP growth will decrease to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has been downgraded by 2.4 portion points because the January projections, reflecting the adverse effects of the ongoing conflict.

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

Qatar: Notably, growth projection for the Qatari economy has seen a sharp decline of 11.0 percentage points since January. The economy is now expected to tape a contraction of 5.7%, below an approximated development of 5.3%, due to serious blockage to liquefied gas products. Qatar is a key gamer in the international energy market, with a global market share of melted gas (LNG) products varying between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would indicate a complete shutdown of the country's financial lifeline, instantly stopping revenue inflows to the state spending plan. Bahrain: Growth forecast for Bahrain's economy has actually decreased by 1.8 percentage points given that January.