Why Economic Shifts Will Shape Arabian Markets

Property rates have come under pressure after a period of strong growth, with current data from the Dubai Land Department showing a drop in home loan deals and cash sales. We believe the risk of an enduring migrant outflow and a serious decline in the real estate sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened up local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. The majority of GCC sovereigns bring fairly little financial obligation and financing risks are therefore limited in the UAE, the main bank's liquidity management has actually relieved immediate issues.

That stated, Bahrain has actually had the ability 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 area considering that the war began. High-frequency fiscal information highlight the strain on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Key Industrial Shifts for 2026

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil profits and a surge in spending, particularly on aids, reflecting contingency investments connected to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the budget deficit to the largest given that 2017.

GCC inflation characteristics remain irregular, with food prices the main source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably suppressed in Saudi Arabia, likely reflecting the mitigating impact of its larger domestic food production base and greater supply-chain durability.

We continue to see cost pressures as mainly temporal instead of 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 elevated and transit through the Strait most likely set to resume gradually, we anticipate the US Federal Reserve to keep rate 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 forecast a 9.4% contraction three months ago). Oil production and exports, which offer essential income 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 trickle 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 international economy after more than a years of civil war. We prepare for GDP development to average 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, monetary reforms, and the progressive reopening of regional trade links.

Evaluating Regional Market Resilience in 2026

The World Bank has actually slashed its 2026 development forecast for Middle East economies, stating total GDP growth in the region is anticipated to slow from an approximated 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 interrupted markets, increased monetary volatility, and damaged 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 Poverty Outlook forecasts that the area's aggregate (omitting the Iran) GDP development will decrease to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has been downgraded by 2.4 portion points considering that the January projections, showing the adverse results of the ongoing conflict.

Saudi Arabia: Forecast was downgraded by 1.2 portion points because January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook remains the strongest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 portion points considering that January.

Qatar: Notably, development projection for the Qatari economy has seen a sharp decrease of 11.0 percentage points given that January. The economy is now anticipated to tape a contraction of 5.7%, below an estimated development of 5.3%, due to serious obstruction to melted gas supplies. Qatar is an essential gamer in the global energy market, with a worldwide market share of liquefied natural gas (LNG) products ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would mean a complete shutdown of the country's financial lifeline, right away stopping profits inflows to the state spending plan. Bahrain: Development forecast for Bahrain's economy has actually declined by 1.8 percentage points considering that January.