Global Investment Prospects across the Middle East

Residential or commercial property prices have come under pressure after a period of strong growth, with current information from the Dubai Land Department showing a drop in home mortgage transactions and cash sales. Nevertheless, we believe the risk of a lasting migrant outflow and an extreme downturn in the realty sector is low.

As an enduring US-Iran offer takes shape, the fallout from the conflict has actually tightened local financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor sentiment. The majority of GCC sovereigns bring fairly little debt and financing risks are for that reason limited in the UAE, the main bank's liquidity management has actually minimized immediate concerns.

That stated, Bahrain has actually been able to rely 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 given that the war began. High-frequency financial information highlight the pressure on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Strategic Capital Shifts for 2026

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 earnings and a surge in costs, particularly on aids, reflecting contingency expenses connected to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the budget plan deficit to the largest since 2017.

GCC inflation dynamics stay unequal, with food costs the main source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively subdued in Saudi Arabia, most likely showing the mitigating effect of its bigger domestic food production base and greater supply-chain durability.

We continue to see price pressures as largely temporal instead of a sign of a continual inflationary cycle. Appropriately, we expect average inflation to ease 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 gradually, we expect the US Federal Reserve to keep rates of interest on hold up until December, and local rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which provide vital profits and FX inflows, have actually been cut by the US marine blockade, while non-oil activity has been seriously hit. In Iraq, oil exports have collapsed to a drip 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 international economy after more than a years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, financial reforms, and the progressive reopening of local trade links.

How Economic Shifts Will Shape Arabian Markets

The World Bank has actually slashed its 2026 development projection for Middle East economies, stating general 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 infrastructure, had interfered with markets, increased financial volatility, and damaged the 2026 development outlook, the World Bank Group said 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 (omitting the Iran) GDP development will decelerate to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 projection has been downgraded by 2.4 percentage points considering that the January forecasts, showing the negative effects of the ongoing dispute.

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

Qatar: Significantly, growth forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points because January. The economy is now expected to record a contraction of 5.7%, below an approximated growth of 5.3%, due to serious obstruction to melted gas materials. Qatar is a crucial gamer in the international energy market, with an international market share of liquefied natural gas (LNG) materials ranging between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would mean a total shutdown of the country's financial lifeline, right away stopping profits inflows to the state budget plan. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 portion points given that January.