Key International Investment Avenues in the GCC Market

Residential or commercial property costs have actually come under pressure after a period of strong growth, with current data from the Dubai Land Department showing a drop in home loan deals and money sales. We believe the risk of a long lasting migrant outflow and a severe recession in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. Many GCC sovereigns carry reasonably little debt and financing threats are therefore limited in the UAE, the main bank's liquidity management has minimized instant issues.

That said, Bahrain has actually had the ability to depend on assistance 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 area since the war started. High-frequency financial information underscore the pressure on regional public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Advancing Economic Growth via Strategic Diversification

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 revenue and a rise in spending, especially on subsidies, showing contingency investments tied to the regional environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the deficit spending to the biggest since 2017.

GCC inflation dynamics stay uneven, with food costs the main 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 showing the mitigating effect of its larger domestic food production base and higher supply-chain resilience.

We continue to view price pressures as mainly temporal instead of a sign of a sustained inflationary cycle. Accordingly, we anticipate average inflation to ease to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we expect the United States Federal Reserve to keep rate of interest on hold until December, and local rate policies to follow fit.

We expect Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which offer necessary profits and FX inflows, have been curtailed by the US naval blockade, while non-oil activity has actually been severely struck. 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 international economy after more than a decade of civil war. We anticipate 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 regional trade links.

Analyzing GCC Market Potential for 2026

The World Bank has actually slashed its 2026 growth projection for Middle East economies, stating general GDP development in the region is expected to slow from an estimated 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 interrupted markets, increased financial volatility, and deteriorated the 2026 growth 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 anticipates that the region's aggregate (leaving out the Iran) GDP development will slow down to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has actually been downgraded by 2.4 percentage points considering that the January projections, showing the unfavorable results of the continuous conflict.

Saudi Arabia: Projection was reduced by 1.2 portion points considering that 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 among Gulf economies. United Arab Emirates: Growth projection for the UAE has fallen by 2.7 portion points because January.

Qatar: Significantly, growth forecast for the Qatari economy has seen a sharp decrease of 11.0 portion points given that January. The economy is now anticipated to tape-record a contraction of 5.7%, below an estimated growth of 5.3%, due to extreme blockage to liquefied gas materials. Qatar is a key gamer in the global energy market, with a worldwide market share of melted gas (LNG) products varying in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would imply a total shutdown of the nation's monetary lifeline, immediately stopping income inflows to the state budget plan. Bahrain: Development projection for Bahrain's economy has declined by 1.8 portion points given that January.