Assessing Regional Market Resilience for 2026

Home prices have actually come under pressure after a period of strong development, with recent information from the Dubai Land Department revealing a drop in mortgage deals and money sales. We think the danger of a lasting migrant outflow and a serious decline in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor belief. Many GCC sovereigns carry fairly little financial obligation and funding threats are for that reason limited in the UAE, the reserve bank's liquidity management has reduced instant issues.

That said, 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 region because the war began. High-frequency financial data highlight the strain on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Why Industrial Diversification Can Transform GCC Markets

In Saudi Arabia, the budget plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil income and a surge in costs, particularly on aids, reflecting contingency outlays connected to the local environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the deficit spending to the largest because 2017.

GCC inflation characteristics remain irregular, with food costs the primary 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 reflecting the mitigating result of its bigger domestic food production base and greater supply-chain durability.

We continue to see price pressures as mostly transitory instead of indicative of a continual inflationary cycle. Accordingly, we expect typical inflation to ease 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 US Federal Reserve to keep interest rates 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 forecast a 9.4% contraction three months ago). Oil production and exports, which supply essential income and FX inflows, have been reduced by the US naval blockade, while non-oil activity has actually been severely hit. 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 international economy after more than a decade of civil war. We anticipate GDP growth to average 9.6% over 2026-2027, supported by renewed financial investment, particularly in banking and energy, financial reforms, and the steady reopening of regional trade links.

How Industrial Diversification Can Transform GCC Markets

The World Bank has actually slashed its 2026 development forecast for Middle East economies, stating overall 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 tactical Strait of Hormuz, and destruction of energy and public facilities, had disrupted markets, increased monetary volatility, and damaged 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 Poverty Outlook anticipates that the area's aggregate (leaving out the Iran) GDP development will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has actually been downgraded by 2.4 percentage points considering that the January forecasts, reflecting the adverse impacts of the continuous conflict.

Saudi Arabia: Projection 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 stays the strongest among Gulf economies. United Arab Emirates: Growth forecast for the UAE has actually fallen by 2.7 portion points considering that January.

Qatar: Significantly, development forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points because January. The economy is now anticipated to tape a contraction of 5.7%, down from an estimated development of 5.3%, due to serious obstruction to melted gas materials. Qatar is a key player in the worldwide energy market, with a worldwide market share of melted gas (LNG) supplies varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would indicate a total shutdown of the nation's monetary lifeline, immediately halting revenue inflows to the state budget plan. Bahrain: Development projection for Bahrain's economy has decreased by 1.8 percentage points because January.