Positioning Regional Portfolios against 2026 Trends

Property costs have come under pressure after a period of strong growth, with current data from the Dubai Land Department showing a drop in home mortgage deals and cash sales. We think the danger of a lasting migrant outflow and a serious slump in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. Many GCC sovereigns bring relatively little financial obligation and funding threats are therefore limited in the UAE, the central bank's liquidity management has relieved immediate issues.

That stated, Bahrain has actually had the ability to rely on support from neighbours, consisting of Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the very first offering from the region since the war started. High-frequency fiscal data underscore the pressure on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Navigating Investment Diversification in 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 decline in oil revenue and a surge in costs, especially on aids, reflecting contingency investments tied to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas income to a stop, swelling the deficit spending to the largest given that 2017.

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

We continue to see price pressures as mainly temporal rather than a sign of a sustained inflationary cycle. Appropriately, we anticipate average inflation to reduce to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we anticipate the US Federal Reserve to keep rates of interest 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 anticipate a 9.4% contraction 3 months ago). Oil production and exports, which offer vital earnings and FX inflows, have actually been reduced 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 global economy after more than a decade of civil war. We anticipate GDP development to average 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, financial reforms, and the gradual reopening of regional trade links.

Essential Industrial Diversification in the Future

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, stating general GDP development in the area is expected to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and destruction of energy and public facilities, had actually interrupted markets, increased financial 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 forecasts that the area's aggregate (excluding the Iran) GDP development will slow down to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has actually been reduced by 2.4 portion points given that the January forecasts, showing the unfavorable impacts of the continuous conflict.

Saudi Arabia: Forecast was reduced by 1.2 portion points given that January. Development is now expected 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 fallen by 2.7 percentage points because January.

Qatar: Notably, growth projection for the Qatari economy has actually seen a sharp decline of 11.0 percentage points because January. The economy is now expected to tape-record a contraction of 5.7%, down from an approximated development of 5.3%, due to severe obstruction to liquefied gas materials. Qatar is a key gamer in the international energy market, with a worldwide market share of liquefied natural gas (LNG) products ranging in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would indicate a total shutdown of the country's monetary lifeline, immediately stopping revenue inflows to the state budget. Bahrain: Development forecast for Bahrain's economy has actually declined by 1.8 portion points because January.