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Home prices have actually come under pressure after a period of strong growth, with recent information from the Dubai Land Department showing a drop in home loan transactions and cash sales. Nonetheless, we think the danger of a lasting migrant outflow and a serious slump in the realty sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened up local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. Many GCC sovereigns bring reasonably little financial obligation and financing threats are for that reason restricted in the UAE, the reserve bank's liquidity management has reduced instant issues.

That said, Bahrain has been able 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 very first offering from the region because the war began. High-frequency fiscal data highlight the pressure on regional public financial resources from the conflict.

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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 income and a surge in spending, particularly on aids, reflecting contingency expenses connected to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a halt, swelling the deficit spending to the biggest because 2017.

GCC inflation characteristics stay unequal, with food rates the primary source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly controlled in Saudi Arabia, most likely reflecting the mitigating effect of its larger domestic food production base and greater supply-chain strength.

We continue to see price pressures as largely temporal instead of a sign of a continual inflationary cycle. Appropriately, we anticipate typical inflation to ease to 2.1% y/y in 2027 as temporary 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 till December, and regional rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which supply necessary revenue and FX inflows, have been curtailed by the US marine blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have collapsed to a trickle 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 international economy after more than a decade of civil war. We anticipate GDP development to average 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, financial reforms, and the progressive reopening of regional trade links.

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The World Bank has actually slashed its 2026 development projection 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 strategic Strait of Hormuz, and damage of energy and public facilities, had actually disrupted markets, increased financial 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 Poverty Outlook anticipates that the area's aggregate (omitting the Iran) GDP growth will decrease to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 projection has actually been downgraded by 2.4 percentage points because the January projections, showing the adverse impacts of the continuous conflict.

Saudi Arabia: Projection was reduced by 1.2 percentage points given that January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook remains the greatest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 percentage points given that January.

Qatar: Especially, growth forecast for the Qatari economy has seen a sharp decrease of 11.0 portion points given that January. The economy is now expected to tape-record a contraction of 5.7%, below an approximated development of 5.3%, due to serious obstruction to melted gas products. Qatar is an essential gamer in the global energy market, with a global market share of liquefied natural gas (LNG) products ranging 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 country's monetary lifeline, right away halting revenue inflows to the state spending plan. Bahrain: Development forecast for Bahrain's economy has actually decreased by 1.8 percentage points given that January.