Key Economic Diversification for 2026

Home prices have come under pressure after a period of strong growth, with recent data from the Dubai Land Department showing a drop in mortgage transactions and money sales. We think the risk of a lasting migrant outflow and a severe downturn in the genuine estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the dispute has tightened up regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor belief. Most GCC sovereigns bring relatively little debt and funding dangers are for that reason limited in the UAE, the reserve bank's liquidity management has actually reduced immediate concerns.

That said, Bahrain has had the ability to rely on assistance 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 region given that the war started. High-frequency fiscal information highlight the strain on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Navigating Investment Strategies for a Global Economy

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 earnings and a rise in costs, particularly on aids, reflecting contingency investments connected to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the budget plan deficit to the largest because 2017.

GCC inflation characteristics stay uneven, with food costs the main source of upward pressure and inflation in this category 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 strength.

We continue to view rate pressures as mostly temporal rather than indicative of a sustained inflationary cycle. Appropriately, we anticipate typical inflation to ease 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 anticipate the US Federal Reserve to keep rate of interest on hold till December, and regional rate policies to follow suit.

We anticipate Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which provide important income and FX inflows, have actually been curtailed by the United States marine blockade, while non-oil activity has actually been seriously struck. In Iraq, oil exports have collapsed to a drip and we're anticipating 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 international economy after more than a years of civil war. We anticipate GDP growth to typical 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, financial reforms, and the steady resuming of regional trade links.

Accelerating Economic Success through Strategic Diversification

The World Bank has slashed its 2026 growth projection for Middle East economies, stating total GDP development in the area is anticipated to slow from an estimated 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 disrupted markets, increased financial volatility, and compromised the 2026 growth 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 forecasts that the region's aggregate (leaving out the Iran) GDP growth will decrease to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has been downgraded by 2.4 percentage points because the January projections, showing the negative effects of the continuous 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 greatest among Gulf economies. United Arab Emirates: Development forecast for the UAE has fallen by 2.7 portion points given that January.

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

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would indicate a total shutdown of the nation's financial lifeline, instantly halting income inflows to the state budget. Bahrain: Growth projection for Bahrain's economy has decreased by 1.8 portion points given that January.