Essential Economic Diversification for the Future

Home costs have come under pressure after a period of strong growth, with recent information from the Dubai Land Department revealing a drop in home mortgage deals and cash 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 dispute has actually tightened local financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor belief. A lot of GCC sovereigns bring fairly little financial obligation and financing risks are for that reason limited in the UAE, the reserve bank's liquidity management has relieved immediate concerns.

That stated, Bahrain has actually been able to depend 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 because the war started. High-frequency fiscal information underscore the stress on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Essential Industrial Shifts for 2026

In Saudi Arabia, the spending plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil earnings and a surge in spending, particularly on aids, reflecting contingency outlays connected to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a halt, swelling the deficit spending to the largest since 2017.

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

We continue to see cost pressures as mostly 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 likely set to resume slowly, we anticipate the United States Federal Reserve to keep rates of interest on hold till December, and local rate policies to follow fit.

We anticipate Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which offer vital income and FX inflows, have been reduced by the US naval blockade, while non-oil activity has been severely 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 worldwide economy after more than a years of civil war. We anticipate GDP development to average 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, monetary reforms, and the progressive resuming of local trade links.

Foreign Capital Opportunities within the Middle East

The World Bank has slashed its 2026 development forecast for Middle East economies, saying general GDP development in the region 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 facilities, had actually interrupted 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 Poverty Outlook anticipates that the region's aggregate (omitting the Iran) GDP growth will decelerate to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 projection has been downgraded by 2.4 portion points since the January projections, reflecting the adverse effects of the ongoing dispute.

Saudi Arabia: Projection was downgraded by 1.2 portion points given that January. Development is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the strongest among Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 portion points considering that January.

Qatar: Significantly, development projection for the Qatari economy has actually seen a sharp decline of 11.0 portion points given that January. The economy is now anticipated to record a contraction of 5.7%, down from an estimated growth of 5.3%, due to extreme obstruction to liquefied gas products. Qatar is a crucial gamer in the worldwide energy market, with a worldwide market share of liquefied gas (LNG) materials ranging in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Subsequently, closing the strait would imply a total shutdown of the nation's financial lifeline, immediately halting profits inflows to the state budget. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 portion points given that January.