Key Industrial Shifts in the Future

Residential or commercial property costs have come under pressure after a period of strong growth, with recent data from the Dubai Land Department showing a drop in home mortgage deals and money sales. Nonetheless, we believe the risk of a lasting migrant outflow and a serious downturn in the genuine estate sector is low.

As an enduring US-Iran offer takes shape, the fallout from the dispute has actually tightened local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. Many GCC sovereigns bring reasonably little debt and funding dangers are for that reason limited in the UAE, the main bank's liquidity management has alleviated instant concerns.

That said, Bahrain has actually had the ability to count 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 since the war started. High-frequency financial data highlight the pressure on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Strategic Capital Shifts for the Future

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 income and a rise in spending, particularly on subsidies, showing contingency outlays tied to the regional environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas profits to a halt, swelling the deficit spending to the biggest given that 2017.

GCC inflation dynamics stay uneven, with food rates the primary source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively subdued in Saudi Arabia, most likely showing the mitigating effect of its bigger domestic food production base and higher supply-chain durability.

We continue to view rate pressures as mostly transitory rather than indicative of a sustained inflationary cycle. Accordingly, we anticipate typical inflation to ease to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume gradually, we expect the United States Federal Reserve to keep interest rates on hold till December, and regional rate policies to do the same.

We anticipate Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which supply vital revenue and FX inflows, have been cut by the US marine blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have actually collapsed to a trickle 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 anticipate GDP growth to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the gradual resuming of local trade links.

How Industrial Diversification Will Transform GCC Markets

The World Bank has actually slashed its 2026 growth projection for Middle East economies, saying general GDP development in the region is anticipated 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 disrupted markets, increased monetary volatility, and weakened the 2026 growth 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 forecasts that the region's aggregate (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has been devalued by 2.4 portion points given that the January forecasts, reflecting the negative impacts of the continuous dispute.

Saudi Arabia: Forecast was downgraded by 1.2 portion points considering that January. Growth is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook remains the greatest amongst Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 portion points since January.

Qatar: Significantly, growth projection for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points given that January. The economy is now anticipated to tape-record a contraction of 5.7%, below an estimated growth of 5.3%, due to severe obstruction to liquefied gas products. Qatar is an essential gamer in the global energy market, with an international market share of melted natural gas (LNG) products varying between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. As a result, closing the strait would imply a complete shutdown of the country's monetary lifeline, immediately halting earnings inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has declined by 1.8 portion points given that January.