Driving Non-Oil Growth through Strategic Diversification

Residential or commercial property costs have actually come under pressure after a period of strong development, with current data from the Dubai Land Department revealing a drop in home loan transactions and cash sales. We think the danger of an enduring migrant outflow and a serious downturn in the genuine estate sector is low.

As an enduring US-Iran offer takes shape, the fallout from the conflict has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. The majority of GCC sovereigns carry fairly little financial obligation and funding threats are therefore restricted in the UAE, the reserve bank's liquidity management has actually minimized instant concerns.

That said, Bahrain has had the ability to depend 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 because the war started. High-frequency fiscal information highlight the pressure on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Top International Capital Avenues for the GCC Region

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil profits and a surge in spending, particularly on aids, showing contingency investments connected to the regional environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the budget plan deficit to the biggest considering that 2017.

GCC inflation dynamics stay uneven, with food prices the primary source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively suppressed in Saudi Arabia, most likely reflecting the mitigating result of its larger domestic food production base and higher supply-chain strength.

We continue to view price pressures as largely temporal instead of indicative of a sustained inflationary cycle. Accordingly, we expect average inflation to ease to 2.1% y/y in 2027 as short-term 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 till December, and regional rate policies to follow fit.

We anticipate Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which supply important revenue and FX inflows, have actually been curtailed by the US marine blockade, while non-oil activity has actually been significantly hit. In Iraq, oil exports have collapsed to a drip 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 global economy after more than a decade of civil war. We prepare for GDP development to typical 9.6% over 2026-2027, supported by restored financial investment, particularly in banking and energy, monetary reforms, and the progressive resuming of regional trade links.

Evaluating Regional Market Resilience in 2026

The World Bank has slashed its 2026 development forecast for Middle East economies, saying overall GDP growth in the area is anticipated 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 infrastructure, had interfered with markets, increased monetary 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 (omitting the Iran) GDP development will decrease to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has actually been downgraded by 2.4 percentage points since the January projections, showing the unfavorable impacts of the continuous conflict.

Saudi Arabia: Projection was downgraded by 1.2 portion points because January. Growth is now anticipated 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 portion points considering that January.

Qatar: Notably, development projection for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points considering that January. The economy is now expected to tape a contraction of 5.7%, down from an approximated development of 5.3%, due to severe blockage to melted gas products. Qatar is a crucial gamer in the global energy market, with a worldwide market share of liquefied natural gas (LNG) materials ranging between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would imply a total shutdown of the nation's financial lifeline, right away halting profits inflows to the state budget plan. Bahrain: Development projection for Bahrain's economy has decreased by 1.8 portion points since January.