Evaluating Regional Investment Resilience for 2026

Property rates have come under pressure after a period of strong growth, with recent information from the Dubai Land Department revealing a drop in home loan deals and cash sales. However, we think the threat of a lasting migrant outflow and a severe slump in the real estate sector is low.

As an enduring US-Iran offer takes shape, the fallout from the conflict has tightened up local monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. Most GCC sovereigns bring fairly little debt and funding dangers are therefore limited in the UAE, the reserve bank's liquidity management has actually minimized immediate issues.

That said, Bahrain has been able 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 region considering that the war started. High-frequency financial information highlight the pressure on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

The 2026 Business Climate of Arabia

In Saudi Arabia, the budget plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil revenue and a surge in spending, particularly on subsidies, reflecting contingency outlays tied to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the deficit spending to the largest given that 2017.

GCC inflation dynamics remain 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, likely showing the mitigating impact of its bigger domestic food production base and higher supply-chain durability.

We continue to see cost pressures as mostly temporal rather than indicative of a sustained inflationary cycle. Appropriately, we anticipate typical inflation to ease to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume slowly, we anticipate the US Federal Reserve to keep rate of interest on hold till December, and regional rate policies to follow suit.

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 supply essential income and FX inflows, have been reduced by the United States naval blockade, while non-oil activity has actually been seriously hit. In Iraq, oil exports have actually collapsed to a trickle and we're forecasting 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 anticipate GDP growth to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the progressive reopening of regional trade links.

Top Foreign Investment Prospects in the GCC Market

The World Bank has slashed its 2026 development forecast for Middle East economies, stating overall GDP growth in the region is anticipated 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 monetary volatility, and deteriorated 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 (leaving out the Iran) GDP development will decelerate to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has been reduced by 2.4 portion points since the January forecasts, reflecting the unfavorable results of the ongoing conflict.

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

Qatar: Significantly, growth forecast for the Qatari economy has actually seen a sharp decline of 11.0 portion points since January. The economy is now anticipated to record a contraction of 5.7%, down from an approximated development of 5.3%, due to serious obstruction to melted gas products. Qatar is a key gamer in the global energy market, with a global market share of liquefied natural gas (LNG) products 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 complete shutdown of the nation's financial lifeline, immediately stopping earnings inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has declined by 1.8 percentage points given that January.