Why Economic Shifts Will Shape GCC Markets

Home costs have actually come under pressure after a duration of strong growth, with current data from the Dubai Land Department showing a drop in home loan deals and money sales. However, we believe the risk of a long lasting migrant outflow and a severe downturn in the property sector is low.

As an enduring US-Iran deal takes shape, the fallout from the dispute has actually tightened up regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier sentiment. Most GCC sovereigns bring reasonably little financial obligation and funding dangers are for that reason limited in the UAE, the central bank's liquidity management has actually minimized immediate concerns.

That said, Bahrain has actually had the ability to count on support from neighbours, consisting of 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 since the war began. High-frequency fiscal information highlight the pressure on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Emerging Stock Market Patterns in 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 profits and a rise in costs, particularly on aids, showing contingency outlays tied 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 because 2017.

GCC inflation dynamics remain uneven, with food costs the main source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly subdued in Saudi Arabia, likely reflecting the mitigating result of its bigger domestic food production base and higher supply-chain durability.

We continue to view rate pressures as mainly transitory rather than a sign of a sustained inflationary cycle. Appropriately, we anticipate typical inflation to reduce to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we expect the US Federal Reserve to keep rates of interest on hold until December, and regional rate policies to follow match.

We anticipate Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which provide vital 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 forecasting 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 decade of civil war. We anticipate GDP growth to typical 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, monetary reforms, and the progressive resuming of local trade links.

Why Industrial Diversification Will Shape Arabian Markets

The World Bank has slashed its 2026 growth projection 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 strategic Strait of Hormuz, and destruction of energy and public facilities, had interrupted markets, increased monetary 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 Hardship Outlook anticipates that the region's aggregate (excluding the Iran) GDP development will slow down to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 projection has been reduced by 2.4 portion points because the January projections, reflecting the unfavorable effects of the ongoing conflict.

Saudi Arabia: Forecast was reduced by 1.2 percentage points since January. Development is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the strongest amongst Gulf economies. United Arab Emirates: Growth forecast for the UAE has actually fallen by 2.7 percentage points considering that January.

Qatar: Especially, growth forecast for the Qatari economy has seen a sharp decline of 11.0 percentage points given that January. The economy is now expected to tape a contraction of 5.7%, down from an estimated development of 5.3%, due to extreme obstruction to liquefied gas supplies. Qatar is a key gamer in the global energy market, with a global market share of melted natural gas (LNG) materials ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would suggest a total shutdown of the country's monetary lifeline, right away stopping income inflows to the state spending plan. Bahrain: Growth forecast for Bahrain's economy has actually decreased by 1.8 percentage points given that January.