Key Industrial Diversification in 2026

Property prices have actually come under pressure after a period of strong development, with recent data from the Dubai Land Department showing a drop in home loan transactions and cash sales. Nevertheless, we believe the danger of a long lasting migrant outflow and a severe recession in the real estate sector is low.

As an enduring US-Iran offer takes shape, the fallout from the conflict has actually tightened up local monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. Most GCC sovereigns carry relatively little debt and financing threats are for that reason limited in the UAE, the reserve bank's liquidity management has actually eased immediate concerns.

That said, Bahrain has actually been able to count on assistance from neighbours, including 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 region given that the war started. High-frequency fiscal data underscore the pressure on regional public financial resources from the conflict.

ANSR July GCC PRs 50DR+

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 decline in oil revenue and a surge in costs, especially on subsidies, showing contingency investments connected to the local environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a halt, swelling the budget deficit to the largest because 2017.

GCC inflation dynamics remain unequal, with food rates the main source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively subdued in Saudi Arabia, likely reflecting the mitigating result of its bigger domestic food production base and higher supply-chain resilience.

We continue to see cost pressures as largely transitory rather than indicative of a sustained inflationary cycle. Accordingly, we anticipate average inflation to reduce 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 slowly, we anticipate the United States Federal Reserve to keep rates of interest on hold till December, and regional rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which supply important revenue and FX inflows, have been curtailed by the US naval blockade, while non-oil activity has been seriously hit. In Iraq, oil exports have actually collapsed to a drip and we're anticipating 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 anticipate GDP growth to average 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, monetary reforms, and the progressive reopening of regional trade links.

2026 Regional Financial Projections

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, saying overall GDP growth in the area is expected 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 weakened the 2026 growth 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 forecasts that the region's aggregate (omitting the Iran) GDP development will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has been devalued by 2.4 portion points because the January forecasts, reflecting the negative impacts of the continuous conflict.

Saudi Arabia: Forecast was downgraded 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 greatest among Gulf economies. United Arab Emirates: Growth projection for the UAE has fallen by 2.7 portion points since January.

Qatar: Especially, development projection for the Qatari economy has actually seen a sharp decline of 11.0 portion points given that January. The economy is now anticipated to tape a contraction of 5.7%, below an estimated growth of 5.3%, due to serious blockage to melted gas supplies. Qatar is an essential player in the international energy market, with a global market share of liquefied natural gas (LNG) materials varying in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. As a result, closing the strait would indicate a complete shutdown of the country's monetary lifeline, instantly halting earnings inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 portion points since January.