Essential Capital Shifts for 2026

Property costs have actually come under pressure after a duration of strong growth, with recent information from the Dubai Land Department showing a drop in home mortgage deals and money sales. We think the danger of a lasting migrant outflow and a severe decline in the genuine estate sector is low.

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

That stated, Bahrain has actually had the ability to count 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 first offering from the region considering that the war started. High-frequency fiscal data highlight the stress on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Navigating Wealth Diversification for a 2026 Economy

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 revenue and a rise in spending, particularly on aids, showing contingency expenses tied to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the deficit spending to the largest since 2017.

GCC inflation characteristics remain irregular, with food prices the primary source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably controlled in Saudi Arabia, most likely reflecting the mitigating result of its bigger domestic food production base and greater supply-chain resilience.

We continue to see price pressures as mostly transitory instead of indicative of a sustained inflationary cycle. Accordingly, we anticipate average 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 slowly, we expect the United States Federal Reserve to keep rates of interest on hold up until December, and local rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which supply vital earnings and FX inflows, have been curtailed by the United States naval blockade, while non-oil activity has actually been severely hit. In Iraq, oil exports have collapsed to a drip 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 investment, particularly in banking and energy, financial reforms, and the steady reopening of local trade links.

Future-Proofing Regional Investments for 2026 Shifts

The World Bank has slashed its 2026 growth forecast for Middle East economies, saying total GDP growth in the area is expected 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 infrastructure, 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 Hardship Outlook anticipates that the region's aggregate (excluding the Iran) GDP development will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has been downgraded by 2.4 portion points since the January projections, showing the adverse impacts of the ongoing dispute.

Saudi Arabia: Projection was reduced 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 stays the greatest among Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 portion points since January.

Qatar: Especially, growth projection for the Qatari economy has actually seen a sharp decline of 11.0 portion points considering that January. The economy is now anticipated to tape-record a contraction of 5.7%, down from an approximated development of 5.3%, due to serious blockage to liquefied gas supplies. Qatar is a key player in the worldwide energy market, with an international market share of liquefied gas (LNG) materials ranging in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would suggest a complete shutdown of the country's monetary lifeline, immediately stopping profits inflows to the state spending plan. Bahrain: Development forecast for Bahrain's economy has actually decreased by 1.8 percentage points considering that January.