Essential Equity Market Insights for Regional Investors

Residential or commercial property prices have actually come under pressure after a period of strong development, with current data from the Dubai Land Department showing a drop in home mortgage deals and cash sales. We think the danger of an enduring migrant outflow and a severe decline in the real estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the conflict has actually tightened up local financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. Most GCC sovereigns carry relatively little financial obligation and funding dangers are for that reason limited in the UAE, the central bank's liquidity management has reduced instant concerns.

That said, Bahrain has had the ability to rely on support from neighbours, consisting of Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the area given that the war started. High-frequency fiscal data underscore the stress on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Key International Investment Prospects for the GCC Region

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil profits and a surge in costs, particularly on aids, reflecting contingency outlays tied to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas income to a stop, swelling the budget deficit to the biggest given that 2017.

GCC inflation dynamics remain uneven, with food prices the primary source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively suppressed in Saudi Arabia, most likely showing the mitigating effect of its bigger domestic food production base and higher supply-chain strength.

We continue to view price pressures as mostly temporal instead of indicative of a sustained inflationary cycle. Appropriately, we expect average inflation to reduce to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume gradually, we expect the US Federal Reserve to keep rate of interest on hold till December, and local rate policies to follow match.

We anticipate Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which provide essential income and FX inflows, have actually been reduced by the United States marine blockade, while non-oil activity has actually been significantly hit. In Iraq, oil exports have collapsed to a drip and we're anticipating 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 years of civil war. We prepare for GDP growth to typical 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the steady reopening of local trade links.

Accelerating Non-Oil Growth through Strategic Diversification

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, saying 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 damage of energy and public facilities, had interfered with markets, increased financial volatility, and damaged 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 Poverty Outlook anticipates that the area's aggregate (leaving out the Iran) GDP development will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has been reduced by 2.4 percentage points because the January forecasts, reflecting the unfavorable effects of the continuous dispute.

Saudi Arabia: Forecast was downgraded by 1.2 portion points given that 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 strongest among Gulf economies. United Arab Emirates: Development projection for the UAE has fallen by 2.7 percentage points since January.

Qatar: Significantly, growth projection for the Qatari economy has actually seen a sharp decline of 11.0 portion points considering that January. The economy is now expected to record a contraction of 5.7%, down from an estimated growth of 5.3%, due to extreme blockage to liquefied gas materials. Qatar is a crucial gamer in the global energy market, with a global market share of liquefied natural gas (LNG) materials ranging in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. As a result, closing the strait would indicate a complete shutdown of the country's financial lifeline, immediately halting income inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 percentage points given that January.