Accelerating Economic Growth via Global Diversification

Home prices have come under pressure after a period of strong development, with current data from the Dubai Land Department showing a drop in home mortgage deals and cash sales. We believe the danger of a long lasting migrant outflow and a severe slump in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the dispute has tightened local financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker financier belief. The majority of GCC sovereigns bring reasonably little debt and financing dangers are therefore restricted in the UAE, the main bank's liquidity management has actually alleviated immediate concerns.

That said, Bahrain has actually 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 fiscal information underscore the strain on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Navigating Capital Strategies for a 2026 Economy

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 profits and a rise in spending, especially on subsidies, reflecting contingency expenses tied to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a stop, swelling the deficit spending to the biggest since 2017.

GCC inflation characteristics stay unequal, with food rates the main source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably suppressed in Saudi Arabia, most likely reflecting the mitigating result of its bigger domestic food production base and greater supply-chain durability.

We continue to see price pressures as largely temporal instead of indicative of a sustained inflationary cycle. Appropriately, we anticipate typical inflation to alleviate to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume slowly, we anticipate the US Federal Reserve to keep rate of interest on hold till December, and regional rate policies to follow match.

We anticipate Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which supply vital income and FX inflows, have actually been reduced by the United States marine blockade, while non-oil activity has been seriously 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 worldwide economy after more than a decade of civil war. We prepare for GDP development to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, monetary reforms, and the progressive reopening of local trade links.

Key International Investment Avenues for the GCC Region

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, stating general GDP development in the area 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 damage of energy and public infrastructure, had actually interrupted markets, increased financial volatility, and damaged 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 Hardship Outlook anticipates that the region's aggregate (omitting the Iran) GDP development will decrease to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has actually been devalued by 2.4 percentage points since the January forecasts, showing the negative impacts of the ongoing 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 stays the greatest amongst Gulf economies. United Arab Emirates: Development projection for the UAE has fallen by 2.7 percentage points given that January.

Qatar: Especially, development forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points since January. The economy is now expected to record a contraction of 5.7%, below an approximated growth of 5.3%, due to serious blockage to melted gas products. Qatar is a crucial player in the international energy market, with an international market share of melted gas (LNG) supplies varying between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its crude oil and derivatives. As a result, closing the strait would indicate a complete shutdown of the country's financial lifeline, right away stopping revenue inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has declined by 1.8 portion points given that January.