Upcoming Middle Eastern Market Outlook

Residential or commercial 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 home mortgage deals and money sales. We believe the risk of an enduring migrant outflow and a serious slump in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened regional monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. A lot of GCC sovereigns carry relatively little debt and funding threats are for that reason restricted in the UAE, the reserve bank's liquidity management has alleviated immediate concerns.

That said, Bahrain has actually been able to rely on assistance from neighbours, consisting of 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 given that the war began. High-frequency financial information underscore the strain on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Positioning Middle East Portfolios against 2026 Shifts

In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil profits and a rise in costs, particularly on subsidies, showing contingency outlays tied to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a halt, swelling the deficit spending to the biggest given that 2017.

GCC inflation characteristics remain uneven, with food prices the main source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly suppressed in Saudi Arabia, most likely showing the mitigating impact of its bigger domestic food production base and higher supply-chain durability.

We continue to see cost pressures as mainly temporal rather than indicative of a sustained inflationary cycle. Appropriately, we anticipate typical inflation to reduce to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume gradually, we anticipate the United States Federal Reserve to keep rates of interest on hold until December, and regional rate policies to follow suit.

We anticipate Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which offer vital profits and FX inflows, have been curtailed by the United States naval blockade, while non-oil activity has been severely hit. In Iraq, oil exports have actually collapsed to a trickle 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 decade of civil war. We prepare for GDP growth to average 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, financial reforms, and the progressive resuming of regional trade links.

Why Industrial Shifts Can Transform GCC Markets

The World Bank has slashed its 2026 growth projection for Middle East economies, stating overall GDP development in the area is anticipated to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and destruction of energy and public facilities, had actually disrupted markets, increased financial 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 Poverty Outlook anticipates that the area's aggregate (omitting the Iran) GDP development will decelerate to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has actually been reduced by 2.4 percentage points considering that the January forecasts, showing the unfavorable impacts of the continuous dispute.

Saudi Arabia: Forecast was devalued by 1.2 percentage points given that January. Development is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook remains the greatest amongst Gulf economies. United Arab Emirates: Development projection for the UAE has actually fallen by 2.7 percentage points given that January.

Qatar: Significantly, development forecast for the Qatari economy has actually seen a sharp decrease of 11.0 portion points since January. The economy is now expected to tape-record a contraction of 5.7%, below an approximated growth of 5.3%, due to serious blockage to melted gas materials. Qatar is a key gamer in the global energy market, with a global market share of liquefied gas (LNG) products varying in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would suggest a total shutdown of the country's financial lifeline, instantly stopping profits inflows to the state budget plan. Bahrain: Growth projection for Bahrain's economy has actually decreased by 1.8 portion points since January.