Optimizing Investment Diversification in a Global Economy

Home costs have come under pressure after a period of strong growth, with current data from the Dubai Land Department revealing a drop in mortgage deals and money sales. We believe the threat of a lasting migrant outflow and a severe slump in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. The majority of GCC sovereigns bring relatively little debt and financing threats are therefore limited in the UAE, the central bank's liquidity management has minimized immediate concerns.

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

ANSR July GCC PRs 50DR+

Future Business Landscape in Arabia

In Saudi Arabia, the spending plan 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 spending, especially on aids, showing contingency outlays tied to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas profits to a halt, swelling the deficit spending to the biggest since 2017.

GCC inflation dynamics remain irregular, with food rates the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly controlled in Saudi Arabia, likely showing the mitigating effect of its larger domestic food production base and greater supply-chain resilience.

We continue to view price pressures as largely temporal instead of a sign of a sustained inflationary cycle. Accordingly, we expect typical inflation to ease to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume gradually, we anticipate the US 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 diminish by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which supply essential income and FX inflows, have been reduced by the United States marine blockade, while non-oil activity has actually been badly struck. 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 international economy after more than a years of civil war. We prepare for GDP growth to typical 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, monetary reforms, and the progressive resuming of local trade links.

The 2026 Investment Climate of Arabia

The World Bank has slashed its 2026 growth forecast for Middle East economies, stating overall 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 strategic Strait of Hormuz, and damage of energy and public infrastructure, had disrupted 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 anticipates that the area's aggregate (excluding the Iran) GDP development 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 considering that the January forecasts, showing the negative results of the continuous dispute.

Saudi Arabia: Projection was reduced by 1.2 percentage points given that January. Development is now expected to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook remains the strongest among Gulf economies. United Arab Emirates: Development forecast for the UAE has actually fallen by 2.7 portion points since January.

Qatar: Especially, development projection for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points given that January. The economy is now anticipated to tape-record a contraction of 5.7%, below an approximated development of 5.3%, due to severe obstruction to melted gas supplies. Qatar is an essential gamer in the international energy market, with an international market share of liquefied gas (LNG) products ranging in between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would suggest a complete shutdown of the nation's financial lifeline, instantly stopping revenue inflows to the state budget plan. Bahrain: Development projection for Bahrain's economy has decreased by 1.8 percentage points since January.