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Property prices have actually come under pressure after a period of strong growth, with current information from the Dubai Land Department showing a drop in mortgage transactions and cash sales. We believe the risk of a lasting migrant outflow and a severe downturn in the real estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. A lot of GCC sovereigns bring fairly little financial obligation and funding risks are for that reason restricted in the UAE, the reserve bank's liquidity management has eased instant concerns.

That stated, Bahrain has been able to rely 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 area since the war started. High-frequency financial data underscore the stress on local public finances from the conflict.

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In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil income and a rise in costs, especially on aids, showing contingency expenses tied to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the deficit spending to the largest given that 2017.

GCC inflation characteristics stay unequal, with food rates the main source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably suppressed in Saudi Arabia, most likely showing the mitigating effect of its larger domestic food production base and greater supply-chain durability.

We continue to see rate pressures as mostly temporal rather than a sign of a continual inflationary cycle. Appropriately, we anticipate average 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 likely set to resume gradually, we expect the US Federal Reserve to keep rate of interest on hold till December, and regional rate policies to do the same.

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 vital income and FX inflows, have been reduced by the US marine blockade, while non-oil activity has been badly struck. In Iraq, oil exports have actually collapsed to a trickle 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 decade of civil war. We expect GDP development to typical 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, financial reforms, and the gradual reopening of local trade links.

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The World Bank has actually slashed its 2026 growth projection for Middle East economies, stating total GDP growth in the area 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 destruction of energy and public facilities, had interfered with markets, increased monetary volatility, and weakened 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 Poverty Outlook forecasts that the region's aggregate (leaving out the Iran) GDP development will decrease to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has been downgraded by 2.4 percentage points considering that the January projections, reflecting the adverse effects of the ongoing conflict.

Saudi Arabia: Forecast was reduced by 1.2 percentage points considering that January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook remains the greatest among Gulf economies. United Arab Emirates: Development projection for the UAE has fallen by 2.7 percentage points since January.

Qatar: Significantly, development projection for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points because January. The economy is now expected to tape-record a contraction of 5.7%, down from an estimated development of 5.3%, due to extreme blockage to liquefied gas products. Qatar is an essential gamer in the global energy market, with an international market share of liquefied gas (LNG) products varying between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would mean a total shutdown of the country's monetary lifeline, immediately stopping revenue inflows to the state spending plan. Bahrain: Growth projection for Bahrain's economy has decreased by 1.8 percentage points because January.