Analyzing GCC Market Resilience in 2026

Property costs have come under pressure after a duration of strong development, with current data from the Dubai Land Department showing a drop in home mortgage deals and money sales. We think the threat of a long lasting migrant outflow and an extreme decline in the real estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the conflict has tightened up regional financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor belief. Most GCC sovereigns carry fairly little debt and funding risks are therefore restricted in the UAE, the reserve bank's liquidity management has relieved immediate concerns.

That said, Bahrain has actually had the ability to depend 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 area considering that the war began. High-frequency financial information highlight the pressure on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Accelerating Economic Growth via Global Diversification

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 earnings and a rise in spending, particularly on aids, reflecting contingency outlays tied to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the budget plan deficit to the largest given that 2017.

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

We continue to view price pressures as mostly temporal instead of indicative of a continual inflationary cycle. Accordingly, we expect average 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 slowly, we anticipate the United States Federal Reserve to keep rate of interest on hold up until December, and regional rate policies to do the same.

We anticipate Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which offer necessary revenue and FX inflows, have been cut by the United States marine blockade, while non-oil activity has been significantly 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 worldwide economy after more than a years of civil war. We anticipate GDP growth to typical 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, monetary reforms, and the steady reopening of local trade links.

Securing GCC Portfolios for 2026 Shifts

The World Bank has actually slashed its 2026 development projection for Middle East economies, stating overall GDP development in the area is anticipated to slow from an approximated 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 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 Poverty Outlook forecasts that the region's aggregate (excluding the Iran) GDP growth will slow down to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has actually been devalued by 2.4 portion points considering that the January forecasts, showing the adverse results of the ongoing dispute.

Saudi Arabia: Forecast was devalued by 1.2 portion points because January. Development is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook remains the strongest among Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 percentage points considering that January.

Qatar: Notably, growth projection for the Qatari economy has seen a sharp decline of 11.0 percentage points considering that January. The economy is now anticipated to record a contraction of 5.7%, below an approximated development of 5.3%, due to severe blockage to liquefied gas supplies. Qatar is a key gamer in the global energy market, with a worldwide market share of liquefied gas (LNG) materials varying between 20% and 21%.

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