Future Regional Economic Outlook

Residential or commercial property costs have actually come under pressure after a period of strong development, with recent information from the Dubai Land Department revealing a drop in mortgage transactions and cash sales. Nonetheless, we believe the danger of an enduring migrant outflow and an extreme decline in the property 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 financier belief. Most GCC sovereigns carry relatively little financial obligation and financing risks are therefore limited in the UAE, the reserve bank's liquidity management has actually alleviated immediate issues.

That said, Bahrain has had the ability 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 region since the war began. High-frequency fiscal information highlight the strain on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Key Capital Diversification 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 decline in oil earnings and a rise in spending, particularly on subsidies, reflecting contingency expenses connected to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the deficit spending to the largest since 2017.

GCC inflation dynamics stay unequal, 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 subdued in Saudi Arabia, likely showing the mitigating effect of its bigger domestic food production base and higher supply-chain resilience.

We continue to view price pressures as mainly temporal instead of a sign of a sustained inflationary cycle. Accordingly, we anticipate average inflation to relieve to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume slowly, we expect the US Federal Reserve to keep rate of interest on hold till December, and regional rate policies to do the same.

We expect Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which offer important earnings and FX inflows, have been curtailed by the US marine blockade, while non-oil activity has been badly struck. In Iraq, oil exports have actually collapsed to a drip 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 worldwide economy after more than a years 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 progressive reopening of local trade links.

Future Investment Landscape in Arabia

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, saying overall GDP development in the area is anticipated to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and damage of energy and public infrastructure, had actually interrupted markets, increased monetary 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 Poverty Outlook anticipates that the region's aggregate (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has been downgraded by 2.4 percentage points given that the January projections, reflecting 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 stays the strongest among Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 percentage points considering that January.

Qatar: Especially, growth forecast for the Qatari economy has actually seen a sharp decrease of 11.0 portion points given that January. The economy is now expected to tape a contraction of 5.7%, below an approximated development of 5.3%, due to severe blockage to liquefied gas supplies. Qatar is a crucial gamer in the international energy market, with a global market share of melted natural gas (LNG) products ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would mean a total shutdown of the country's monetary lifeline, instantly halting income inflows to the state budget plan. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 percentage points considering that January.