Strategic Economic Expansion for 2026

Home prices have actually come under pressure after a period of strong development, with current information from the Dubai Land Department showing a drop in mortgage transactions and cash sales. We think the threat of an enduring migrant outflow and a severe decline in the real estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has tightened up regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor belief. Many GCC sovereigns carry fairly little financial obligation and financing risks are therefore restricted in the UAE, the central bank's liquidity management has actually minimized instant concerns.

That stated, Bahrain has actually been able to depend on assistance from neighbours, including Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the area because the war began. High-frequency fiscal data highlight the stress on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Advancing Non-Oil Success 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 income and a surge in spending, particularly on aids, showing contingency investments connected to the local environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the spending plan deficit to the biggest because 2017.

GCC inflation characteristics remain unequal, with food rates the main source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably subdued in Saudi Arabia, likely showing the mitigating result of its bigger domestic food production base and greater supply-chain resilience.

We continue to see rate pressures as largely transitory instead of indicative of a continual inflationary cycle. Appropriately, we expect typical inflation to alleviate to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume gradually, we anticipate the United States Federal Reserve to keep interest rates on hold until December, and local rate policies to do the same.

We expect Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which provide vital earnings and FX inflows, have been curtailed by the US marine blockade, while non-oil activity has actually been significantly hit. In Iraq, oil exports have collapsed to a trickle 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 expect GDP growth to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the progressive resuming of local trade links.

Navigating Capital Diversification in a Global Economy

The World Bank has actually slashed its 2026 development forecast for Middle East economies, saying overall GDP development in the region is anticipated to slow from an estimated 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 interfered with markets, increased financial volatility, and weakened 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 region's aggregate (omitting 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 actually been downgraded by 2.4 percentage points given that the January forecasts, showing the adverse results of the continuous conflict.

Saudi Arabia: Forecast was downgraded by 1.2 portion points since January. Development is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook remains the greatest amongst Gulf economies. United Arab Emirates: Development forecast for the UAE has fallen by 2.7 portion points since January.

Qatar: Especially, growth forecast for the Qatari economy has actually seen a sharp decrease of 11.0 portion points considering that January. The economy is now expected to record a contraction of 5.7%, below an approximated development of 5.3%, due to severe obstruction to melted gas products. Qatar is a key player in the worldwide energy market, with an international market share of liquefied natural gas (LNG) materials varying between 20% and 21%.

Kuwait relies completely (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 monetary lifeline, immediately stopping revenue inflows to the state budget plan. Bahrain: Growth projection for Bahrain's economy has decreased by 1.8 percentage points considering that January.