Driving Non-Oil Success via Global Diversification

Residential or commercial property costs have actually come under pressure after a period of strong development, with recent data from the Dubai Land Department revealing a drop in mortgage transactions and cash sales. Nonetheless, we think the danger of an enduring migrant outflow and an extreme decline in the realty sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. The majority of GCC sovereigns bring relatively little financial obligation and financing risks are for that reason limited in the UAE, the reserve bank's liquidity management has relieved instant concerns.

That said, Bahrain has actually been able to count on support from neighbours, including 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 began. High-frequency financial data underscore the pressure on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Top Foreign Capital Avenues in the GCC Market

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 revenue and a surge in costs, particularly on aids, reflecting contingency investments connected to the local environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the budget plan deficit to the biggest considering that 2017.

GCC inflation dynamics remain uneven, with food costs the main source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably subdued in Saudi Arabia, likely showing the mitigating result of its larger domestic food production base and higher supply-chain durability.

We continue to view rate pressures as largely transitory rather than indicative of a continual inflationary cycle. Accordingly, we expect average 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 United States Federal Reserve to keep interest rates on hold until December, and local rate policies to do the same.

We anticipate Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which provide essential income and FX inflows, have been reduced by the United States 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 international economy after more than a years 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.

Emerging Stock Market Patterns in 2026

The World Bank has slashed its 2026 growth forecast for Middle East economies, saying general 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 damage of energy and public infrastructure, had interrupted markets, increased financial volatility, and weakened 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 Hardship Outlook anticipates that the region's aggregate (omitting the Iran) GDP development will decrease to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has actually been reduced by 2.4 percentage points considering that the January projections, showing the adverse results of the continuous conflict.

Saudi Arabia: Forecast was downgraded by 1.2 portion points since 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 stays the strongest amongst Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 percentage points because January.

Qatar: Significantly, growth projection for the Qatari economy has seen a sharp decrease of 11.0 portion points because January. The economy is now expected to record a contraction of 5.7%, down from an estimated growth of 5.3%, due to extreme blockage to liquefied gas materials. Qatar is a crucial gamer in the international energy market, with a worldwide market share of melted natural gas (LNG) materials varying between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its crude oil and derivatives. Subsequently, closing the strait would indicate a complete shutdown of the country's monetary lifeline, right away stopping income inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has decreased by 1.8 portion points since January.