Why Economic Shifts Can Shape GCC Markets

Residential or commercial property rates have come under pressure after a period of strong growth, with recent information from the Dubai Land Department revealing a drop in home loan transactions and cash sales. We believe the danger of a lasting migrant outflow and a severe decline in the genuine estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the dispute has tightened up local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. A lot of GCC sovereigns carry fairly little financial obligation and funding risks are therefore limited in the UAE, the central bank's liquidity management has minimized immediate issues.

That said, Bahrain has had the ability to rely 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 because the war started. High-frequency financial data underscore the pressure on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Analyzing GCC Market Resilience 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 costs, particularly on subsidies, showing contingency expenses tied to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a stop, swelling the spending plan deficit to the largest given that 2017.

GCC inflation dynamics remain irregular, 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 reasonably suppressed in Saudi Arabia, most likely reflecting the mitigating impact of its bigger domestic food production base and greater supply-chain durability.

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

We expect Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which provide important profits 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 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 years of civil war. We prepare for GDP development to average 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, financial reforms, and the steady reopening of regional trade links.

2026 Middle Eastern Financial Outlook

The World Bank has slashed its 2026 growth forecast for Middle East economies, saying total GDP growth in the region 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 destruction of energy and public facilities, had interrupted markets, increased financial volatility, and compromised 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 Poverty Outlook forecasts that the region's aggregate (leaving out the Iran) GDP development will slow down to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has actually been downgraded by 2.4 percentage points given that the January forecasts, reflecting the negative results of the ongoing dispute.

Saudi Arabia: Projection was downgraded by 1.2 percentage points because January. Development is now anticipated 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: Development forecast for the UAE has actually fallen by 2.7 portion points given that January.

Qatar: Notably, development projection for the Qatari economy has seen a sharp decline of 11.0 percentage points since January. The economy is now anticipated to tape-record a contraction of 5.7%, down from an approximated growth of 5.3%, due to severe blockage to melted gas materials. Qatar is an essential player in the worldwide energy market, with an international market share of liquefied gas (LNG) products ranging in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Subsequently, closing the strait would mean a complete shutdown of the country's monetary lifeline, instantly halting earnings inflows to the state spending plan. Bahrain: Growth projection for Bahrain's economy has decreased by 1.8 portion points since January.