Driving Economic Success through Global Diversification

Residential or commercial property prices have come under pressure after a duration of strong growth, with current information from the Dubai Land Department revealing a drop in mortgage transactions and money sales. Nonetheless, we think the danger of an enduring migrant outflow and a serious slump in the property sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has tightened up local financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. The majority of GCC sovereigns carry relatively little debt and financing risks are for that reason limited in the UAE, the central bank's liquidity management has actually relieved instant concerns.

That said, Bahrain has actually been able to count on assistance 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 region given that the war started. High-frequency fiscal information underscore the pressure on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Positioning Middle East Investments against 2026 Shifts

In Saudi Arabia, the budget plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil revenue and a rise in costs, particularly on subsidies, reflecting contingency investments connected to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas income to a stop, swelling the deficit spending to the biggest because 2017.

GCC inflation characteristics stay irregular, with food prices the main source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably suppressed in Saudi Arabia, likely showing the mitigating result of its larger domestic food production base and higher supply-chain resilience.

We continue to view rate pressures as mainly transitory instead of indicative of a continual inflationary cycle. Appropriately, we anticipate typical inflation to reduce to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume gradually, we expect the US Federal Reserve to keep interest rates on hold till December, and local rate policies to follow suit.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which offer essential earnings and FX inflows, have actually been cut by the US naval blockade, while non-oil activity has been seriously hit. In Iraq, oil exports have collapsed to a trickle and we're forecasting 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 global economy after more than a decade of civil war. We prepare for 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.

Key International Investment Avenues in the GCC Market

The World Bank has actually slashed its 2026 growth projection for Middle East economies, stating total GDP development in the region is expected to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and destruction of energy and public facilities, had actually interrupted markets, increased financial volatility, and deteriorated 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 region's aggregate (leaving out the Iran) GDP growth will slow down to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has been downgraded by 2.4 percentage points since the January forecasts, showing the unfavorable effects of the continuous dispute.

Saudi Arabia: Forecast was devalued by 1.2 portion points considering that January. Development 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 actually fallen by 2.7 percentage points since January.

Qatar: Notably, growth forecast for the Qatari economy has seen a sharp decline of 11.0 portion points given that January. The economy is now anticipated to record a contraction of 5.7%, down from an approximated development of 5.3%, due to severe blockage to melted gas supplies. Qatar is a key player in the global energy market, with a worldwide market share of liquefied gas (LNG) supplies 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 country's monetary lifeline, instantly stopping income inflows to the state budget plan. Bahrain: Development projection for Bahrain's economy has decreased by 1.8 percentage points because January.