Navigating Capital Diversification for a 2026 Economy

Home rates have come under pressure after a duration of strong growth, with current data from the Dubai Land Department showing a drop in mortgage deals and cash sales. We think the danger of a lasting migrant outflow and an extreme decline in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. The majority of GCC sovereigns bring fairly little financial obligation and financing dangers are for that reason limited in the UAE, the main bank's liquidity management has actually alleviated instant issues.

That stated, Bahrain has actually had the ability to depend on assistance from neighbours, consisting of 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 area since the war started. High-frequency fiscal data highlight the stress on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Foreign Investment Opportunities within the Middle East

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 costs, particularly on subsidies, showing contingency outlays tied to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the deficit spending to the biggest because 2017.

GCC inflation dynamics stay uneven, 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 subdued in Saudi Arabia, likely reflecting the mitigating impact of its bigger domestic food production base and higher supply-chain durability.

We continue to view cost pressures as mostly transitory rather than indicative of a sustained inflationary cycle. Appropriately, we expect typical inflation to ease to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume gradually, we expect the US Federal Reserve to keep interest rates on hold till December, and local 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 essential earnings and FX inflows, have been reduced by the United States marine blockade, while non-oil activity has been badly hit. In Iraq, oil exports have actually collapsed to a trickle 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 international economy after more than a years of civil war. We expect GDP development to typical 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, financial reforms, and the progressive reopening of local trade links.

Foreign Investment Opportunities within the GCC

The World Bank has actually slashed its 2026 development projection for Middle East economies, stating general 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 strategic Strait of Hormuz, and destruction of energy and public infrastructure, had disrupted markets, increased monetary volatility, and weakened 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 (leaving out the Iran) GDP growth will slow down to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 projection has been downgraded by 2.4 percentage points given that the January projections, reflecting the adverse results of the ongoing dispute.

Saudi Arabia: Forecast was devalued by 1.2 portion points since January. Growth is now expected 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 projection for the UAE has fallen by 2.7 portion points since January.

Qatar: Notably, growth forecast for the Qatari economy has seen a sharp decline of 11.0 portion points because January. The economy is now expected to tape a contraction of 5.7%, below an estimated development of 5.3%, due to extreme blockage to melted gas supplies. Qatar is an essential player in the global energy market, with a worldwide market share of liquefied gas (LNG) materials ranging in between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Subsequently, closing the strait would suggest a total shutdown of the nation's monetary lifeline, right away stopping revenue inflows to the state budget. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 portion points given that January.