Upcoming Regional Financial Outlook

Home costs have actually come under pressure after a period of strong development, with recent information from the Dubai Land Department showing a drop in mortgage transactions and money sales. We think the risk of a lasting migrant outflow and an extreme recession in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the dispute has tightened local monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor sentiment. The majority of GCC sovereigns carry reasonably little debt and financing risks are for that reason limited in the UAE, the central bank's liquidity management has actually relieved immediate issues.

That stated, Bahrain has actually been able to depend on assistance from neighbours, including 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 region because the war began. High-frequency financial information underscore the stress on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

2026 Middle Eastern Market Projections

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 profits and a surge in costs, especially on aids, reflecting contingency outlays tied to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the budget deficit to the biggest because 2017.

GCC inflation dynamics stay unequal, with food costs the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly suppressed in Saudi Arabia, most likely showing the mitigating impact of its bigger domestic food production base and greater supply-chain durability.

We continue to view cost pressures as mostly transitory instead of indicative of a sustained inflationary cycle. Accordingly, we expect average inflation to relieve to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume slowly, we anticipate the US Federal Reserve to keep interest rates on hold until December, and local rate policies to follow fit.

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

Top Foreign Investment Avenues for the GCC Region

The World Bank has actually slashed its 2026 growth projection for Middle East economies, stating general 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 strategic Strait of Hormuz, and destruction of energy and public facilities, had actually interfered with markets, increased monetary volatility, and weakened 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 area'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 actually been downgraded by 2.4 portion points because the January projections, reflecting the adverse impacts of the continuous conflict.

Saudi Arabia: Forecast was downgraded 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 stays the greatest among Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 portion points given that January.

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

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would imply a total shutdown of the nation's financial lifeline, immediately halting income inflows to the state budget. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 percentage points considering that January.