Future Regional Economic Outlook

Property costs have actually come under pressure after a duration of strong growth, with current information from the Dubai Land Department revealing a drop in home mortgage deals and cash sales. However, we think the danger of a long lasting migrant outflow and an extreme downturn in the realty sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has tightened up local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier belief. The majority of GCC sovereigns carry reasonably little debt and financing dangers are therefore restricted in the UAE, the reserve bank's liquidity management has minimized immediate issues.

That said, Bahrain has been able to rely on assistance from neighbours, including 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 considering that the war started. High-frequency financial data highlight the stress on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Future-Proofing Regional Portfolios against 2026 Shifts

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 income and a surge in spending, especially on subsidies, showing contingency investments connected to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas income to a stop, swelling the budget plan deficit to the biggest considering that 2017.

GCC inflation characteristics stay uneven, with food rates the primary source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively controlled in Saudi Arabia, likely reflecting the mitigating effect of its larger domestic food production base and higher supply-chain strength.

We continue to see rate pressures as mainly transitory instead of a sign of a sustained inflationary cycle. Accordingly, we anticipate typical inflation to alleviate to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume slowly, we expect the United States Federal Reserve to keep interest rates on hold until 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 three months ago). Oil production and exports, which provide essential income and FX inflows, have been reduced by the US marine blockade, while non-oil activity has actually been badly 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 global economy after more than a years of civil war. We expect GDP development to typical 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, monetary reforms, and the progressive reopening of regional trade links.

Emerging Stock Market Patterns for 2026

The World Bank has actually slashed its 2026 development projection for Middle East economies, saying overall GDP development in the region is expected to slow from an approximated 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 actually disrupted markets, increased monetary volatility, and damaged the 2026 development outlook, the World Bank Group stated 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 area'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 actually been devalued by 2.4 percentage points since the January projections, reflecting the unfavorable results of the ongoing dispute.

Saudi Arabia: Projection was downgraded by 1.2 percentage points considering that 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 portion points because January.

Qatar: Significantly, growth forecast for the Qatari economy has seen a sharp decline of 11.0 portion points since January. The economy is now expected to tape a contraction of 5.7%, down from an approximated growth of 5.3%, due to extreme obstruction to liquefied gas materials. Qatar is a crucial gamer in the global energy market, with a worldwide market share of melted gas (LNG) supplies varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. As a result, closing the strait would suggest a total shutdown of the country's monetary lifeline, instantly halting earnings inflows to the state spending plan. Bahrain: Growth forecast for Bahrain's economy has decreased by 1.8 percentage points given that January.