How Industrial Shifts Can Shape GCC Markets

Property rates have come under pressure after a period of strong growth, with recent data from the Dubai Land Department showing a drop in mortgage transactions and money sales. We think the risk of a long lasting migrant outflow and an extreme downturn in the genuine estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. The majority of GCC sovereigns bring reasonably little financial obligation and financing dangers are therefore restricted in the UAE, the reserve bank's liquidity management has relieved immediate concerns.

That said, Bahrain has been able to depend 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 region because the war began. High-frequency fiscal data highlight the strain on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Navigating Investment Strategies for a 2026 Economy

In Saudi Arabia, the spending plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil profits and a rise in spending, particularly on aids, reflecting contingency outlays connected to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a halt, swelling the budget plan deficit to the biggest since 2017.

GCC inflation dynamics stay unequal, with food rates the main source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly controlled in Saudi Arabia, most likely showing the mitigating effect of its larger domestic food production base and higher supply-chain resilience.

We continue to see price pressures as largely temporal instead of indicative of a continual inflationary cycle. Accordingly, we expect typical inflation to relieve to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume slowly, we expect the US Federal Reserve to keep interest rates on hold till December, and local rate policies to do the same.

We anticipate 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 important earnings and FX inflows, have actually been curtailed by the US naval blockade, while non-oil activity has been badly hit. In Iraq, oil exports have collapsed to a drip 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 worldwide economy after more than a years of civil war. We anticipate GDP development to typical 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, monetary reforms, and the steady reopening of local trade links.

Navigating Capital Diversification for a Global Economy

The World Bank has slashed its 2026 development projection for Middle East economies, stating overall GDP development 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 infrastructure, had interrupted markets, increased financial volatility, and deteriorated 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 (omitting the Iran) GDP growth will slow down to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has actually been devalued by 2.4 portion points because the January projections, showing the negative impacts of the ongoing dispute.

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

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

Kuwait relies entirely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Consequently, closing the strait would indicate a complete shutdown of the country's monetary lifeline, immediately stopping profits inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has decreased by 1.8 portion points since January.