How Industrial Shifts Can Shape GCC Markets

Residential or commercial property prices have come under pressure after a period of strong growth, with current data from the Dubai Land Department revealing a drop in home loan transactions and cash sales. We think the threat of an enduring migrant outflow and an extreme recession in the real estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker financier sentiment. Most GCC sovereigns carry fairly little financial obligation and funding threats are for that reason limited in the UAE, the central bank's liquidity management has actually reduced immediate issues.

That stated, Bahrain has had the ability to depend 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 because the war started. High-frequency financial information underscore the pressure on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Optimizing Capital Strategies for a Global Economy

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

GCC inflation dynamics remain unequal, with food costs the main source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively controlled in Saudi Arabia, most likely showing the mitigating result of its bigger domestic food production base and higher supply-chain strength.

We continue to see cost pressures as mainly transitory rather than a sign of a sustained inflationary cycle. Appropriately, we expect average inflation to reduce 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 expect the US Federal Reserve to keep rate of interest on hold up until December, and regional rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which provide essential income and FX inflows, have been cut by the United States naval blockade, while non-oil activity has actually been badly struck. 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 typical 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, financial reforms, and the progressive reopening of regional trade links.

International Capital Prospects across the GCC

The World Bank has slashed its 2026 growth projection for Middle East economies, saying overall GDP development in the region is expected to slow from an estimated 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 disrupted markets, increased monetary volatility, and damaged the 2026 growth 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 Hardship Outlook anticipates that the region's aggregate (leaving out the Iran) GDP development will slow down to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 projection has actually been devalued by 2.4 portion points considering that the January projections, reflecting the negative effects of the ongoing dispute.

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

Qatar: Especially, growth forecast for the Qatari economy has actually seen a sharp decrease of 11.0 portion points since January. The economy is now expected to record a contraction of 5.7%, down from an approximated development of 5.3%, due to severe obstruction to melted gas products. Qatar is an essential gamer in the global energy market, with a global market share of melted natural gas (LNG) supplies varying in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Subsequently, closing the strait would indicate a total shutdown of the country's financial lifeline, right away halting earnings inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has declined by 1.8 percentage points since January.