2026 Regional Market Projections

Residential or commercial property costs have come under pressure after a period of strong growth, with current information from the Dubai Land Department revealing a drop in home loan deals and money sales. Nonetheless, we think the threat of a lasting migrant outflow and an extreme recession in the property sector is low.

As an enduring US-Iran deal takes shape, the fallout from the dispute has tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. Many GCC sovereigns carry relatively little financial obligation and funding threats are for that reason restricted in the UAE, the reserve bank's liquidity management has actually alleviated instant issues.

That stated, Bahrain has had the ability to rely on assistance from neighbours, including Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the region given that the war started. High-frequency fiscal data underscore the stress on local public finances from the dispute.

ANSR July GCC PRs 50DR+

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In Saudi Arabia, the spending plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil income and a surge in spending, especially on subsidies, showing contingency outlays connected to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas profits to a stop, swelling the budget plan deficit to the biggest considering that 2017.

GCC inflation dynamics remain uneven, with food costs the main 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 showing the mitigating result of its bigger domestic food production base and greater supply-chain durability.

We continue to view cost pressures as largely transitory instead of a sign of a continual inflationary cycle. Accordingly, we expect typical inflation to alleviate to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume gradually, we anticipate the United States Federal Reserve to keep rate of interest on hold until December, and local 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 provide necessary income and FX inflows, have actually been cut by the United States naval blockade, while non-oil activity has actually been badly struck. In Iraq, oil exports have 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 global economy after more than a years 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 regional trade links.

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The World Bank has slashed its 2026 growth projection for Middle East economies, saying total GDP development in the area is expected to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and damage of energy and public infrastructure, had interrupted markets, increased financial volatility, and compromised 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 (leaving out the Iran) GDP development will decrease to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has been reduced by 2.4 portion points because the January projections, reflecting the negative effects of the continuous conflict.

Saudi Arabia: Projection was reduced by 1.2 percentage points since 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 strongest among Gulf economies. United Arab Emirates: Development forecast for the UAE has fallen by 2.7 percentage points considering that January.

Qatar: Especially, development projection for the Qatari economy has actually seen a sharp decline of 11.0 percentage points considering that January. The economy is now expected to tape a contraction of 5.7%, below an estimated development of 5.3%, due to serious obstruction to liquefied gas materials. Qatar is a crucial player in the global energy market, with a global 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 petroleum and derivatives. Closing the strait would indicate a total shutdown of the nation's monetary lifeline, immediately stopping revenue inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 portion points considering that January.