Driving Industrial Success via Strategic Diversification

Home prices have actually come under pressure after a period of strong development, with current data from the Dubai Land Department showing a drop in home loan deals and cash sales. However, we believe the threat of a lasting migrant outflow and a severe recession in the genuine estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the dispute has tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker financier sentiment. Many GCC sovereigns carry relatively little financial obligation and financing dangers are for that reason restricted in the UAE, the reserve bank's liquidity management has reduced instant concerns.

That stated, Bahrain has had the ability to count 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 since the war began. High-frequency fiscal information highlight the pressure on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Advancing Non-Oil Growth via Global Diversification

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 revenue and a rise in spending, especially on subsidies, showing contingency investments connected to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the deficit spending to the biggest because 2017.

GCC inflation characteristics stay unequal, with food rates the main source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably controlled in Saudi Arabia, likely reflecting the mitigating impact of its larger domestic food production base and higher supply-chain strength.

We continue to view rate pressures as mostly temporal rather than a sign of a continual inflationary cycle. Accordingly, we expect 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 anticipate the US Federal Reserve to keep interest rates on hold up until December, and local rate policies to follow match.

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 offer essential income and FX inflows, have actually been reduced by the United States naval blockade, while non-oil activity has been seriously 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 years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, monetary reforms, and the progressive reopening of local trade links.

Evaluating Regional Market Potential for 2026

The World Bank has actually slashed its 2026 growth projection for Middle East economies, saying total GDP development in the area 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 damage of energy and public facilities, had interfered with markets, increased monetary 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 region'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 forecast has been downgraded by 2.4 percentage points because the January forecasts, showing the negative effects of the ongoing conflict.

Saudi Arabia: Projection was devalued by 1.2 percentage points considering that January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook stays the strongest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 portion points since January.

Qatar: Significantly, development projection for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points since January. The economy is now anticipated to tape a contraction of 5.7%, below an estimated growth of 5.3%, due to severe obstruction to liquefied gas materials. Qatar is a key player in the global energy market, with a worldwide market share of liquefied gas (LNG) products ranging between 20% and 21%.

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