Future Investment Climate in the GCC

Residential or commercial property costs have come under pressure after a period of strong development, with current data from the Dubai Land Department revealing a drop in mortgage deals and cash sales. Nevertheless, we believe the danger of an enduring migrant outflow and a severe slump in the property sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. The majority of GCC sovereigns bring relatively little debt and financing dangers are for that reason limited in the UAE, the main bank's liquidity management has alleviated immediate concerns.

That stated, Bahrain has been able to depend on support 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 considering that the war started. High-frequency fiscal information underscore the strain on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Foreign Capital Prospects within the GCC

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, especially on subsidies, showing contingency expenses tied to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the budget deficit to the largest considering that 2017.

GCC inflation characteristics stay uneven, with food costs the primary source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably suppressed in Saudi Arabia, most likely reflecting the mitigating impact of its larger domestic food production base and higher supply-chain strength.

We continue to see cost pressures as mostly transitory instead of indicative of a continual inflationary cycle. Accordingly, we expect average inflation to alleviate to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume slowly, we anticipate the US Federal Reserve to keep rate of interest on hold until December, and regional rate policies to follow suit.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which supply important profits and FX inflows, have been reduced by the US naval blockade, while non-oil activity has actually been badly struck. In Iraq, oil exports have collapsed to a drip 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 global economy after more than a decade of civil war. We expect GDP growth to average 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, financial reforms, and the steady resuming of regional trade links.

Positioning GCC Portfolios against 2026 Trends

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, stating overall GDP development in the region is expected to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and destruction of energy and public facilities, had actually interfered with markets, increased monetary volatility, and deteriorated 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 Hardship Outlook forecasts that the area's aggregate (omitting the Iran) GDP growth will decrease to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has actually been downgraded by 2.4 percentage points given that the January forecasts, reflecting the unfavorable results of the continuous conflict.

Saudi Arabia: Forecast was devalued by 1.2 percentage points considering that January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the greatest among Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 portion points given that January.

Qatar: Especially, growth projection for the Qatari economy has seen a sharp decline of 11.0 portion points given that January. The economy is now expected to tape-record a contraction of 5.7%, below an approximated development of 5.3%, due to extreme obstruction to melted gas supplies. Qatar is an essential player in the worldwide energy market, with an international market share of melted natural gas (LNG) products ranging in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Consequently, closing the strait would imply a complete shutdown of the country's monetary lifeline, immediately halting revenue inflows to the state budget. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 percentage points given that January.