Assessing GCC Market Resilience in 2026

Home prices have actually come under pressure after a duration of strong development, with current data from the Dubai Land Department showing a drop in home loan deals and money sales. We think the threat of a long lasting migrant outflow and a severe downturn in the real estate sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor belief. Many GCC sovereigns bring relatively little financial obligation and funding threats are therefore restricted in the UAE, the reserve bank's liquidity management has actually relieved instant issues.

That said, Bahrain has actually had the ability to count on support 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 started. High-frequency fiscal data highlight the strain on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Key Foreign Capital Avenues in 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 decrease in oil income and a rise in spending, particularly on subsidies, showing contingency expenses tied to the regional environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the deficit spending to the largest considering that 2017.

GCC inflation characteristics stay unequal, with food costs the primary source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly suppressed in Saudi Arabia, most likely showing the mitigating impact of its larger domestic food production base and higher supply-chain durability.

We continue to see rate pressures as largely temporal rather than a sign of a continual inflationary cycle. Appropriately, we expect average inflation to ease to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume gradually, we expect the United States Federal Reserve to keep rates of interest on hold till December, and local rate policies to do the same.

We anticipate Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which supply vital profits and FX inflows, have actually been curtailed by the United States naval blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have collapsed to a drip 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 global economy after more than a years of civil war. We expect GDP growth to typical 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, monetary reforms, and the gradual resuming of regional trade links.

Driving Industrial Growth through Strategic Diversification

The World Bank has actually slashed its 2026 development projection for Middle East economies, saying overall GDP development in the area 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 disrupted markets, increased financial volatility, and compromised 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 Hardship Outlook forecasts that the area'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 percentage points because the January forecasts, showing the adverse impacts of the ongoing dispute.

Saudi Arabia: Projection was reduced by 1.2 portion 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 amongst Gulf economies. United Arab Emirates: Development projection for the UAE has fallen by 2.7 portion points because January.

Qatar: Significantly, development forecast for the Qatari economy has actually seen a sharp decrease of 11.0 portion points because January. The economy is now anticipated to tape-record a contraction of 5.7%, down from an estimated growth of 5.3%, due to severe blockage to melted gas supplies. Qatar is an essential player in the global energy market, with a worldwide market share of melted gas (LNG) materials varying between 20% and 21%.

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