2026 Middle Eastern Economic Outlook

Home rates have come under pressure after a duration of strong development, with recent data from the Dubai Land Department revealing a drop in mortgage transactions and money sales. Nevertheless, we think the threat of a long lasting migrant outflow and an extreme slump in the real estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the dispute has tightened regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. Many GCC sovereigns carry fairly little financial obligation and funding threats are for that reason restricted in the UAE, the reserve bank's liquidity management has actually relieved instant concerns.

That stated, Bahrain has actually had the ability to count 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 region considering that the war began. High-frequency fiscal information underscore the strain on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Analyzing Regional Market Resilience 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 rise in costs, particularly on aids, showing contingency outlays tied to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a halt, swelling the budget deficit to the largest considering that 2017.

GCC inflation characteristics stay uneven, with food prices the main source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably controlled in Saudi Arabia, likely showing the mitigating result of its larger domestic food production base and greater supply-chain strength.

We continue to view rate pressures as mainly transitory rather than indicative of a continual inflationary cycle. Accordingly, we anticipate typical inflation to ease to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume gradually, we anticipate the US Federal Reserve to keep rate of interest on hold till December, and regional rate policies to do the same.

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 profits and FX inflows, have actually been curtailed by the US marine blockade, while non-oil activity has actually been badly struck. 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 decade of civil war. We anticipate GDP development to typical 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, financial reforms, and the steady resuming of regional trade links.

Top International Capital Avenues for the GCC Region

The World Bank has slashed its 2026 growth forecast for Middle East economies, stating total GDP growth in the region 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 damage of energy and public infrastructure, had actually disrupted 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 Poverty Outlook anticipates that the area's aggregate (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has been reduced by 2.4 percentage points considering that the January projections, showing the unfavorable impacts of the ongoing dispute.

Saudi Arabia: Forecast was downgraded by 1.2 portion points because January. Development is now expected to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook stays the strongest amongst Gulf economies. United Arab Emirates: Development forecast for the UAE has fallen by 2.7 percentage points given that January.

Qatar: Significantly, growth forecast for the Qatari economy has actually seen a sharp decrease of 11.0 portion points since January. The economy is now expected to tape a contraction of 5.7%, below an estimated growth of 5.3%, due to extreme obstruction to liquefied gas supplies. Qatar is a key gamer in the worldwide energy market, with a worldwide market share of liquefied gas (LNG) products ranging in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would mean a total shutdown of the nation's monetary lifeline, right away halting revenue inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has actually decreased by 1.8 portion points because January.