Key Economic Shifts for 2026

Home rates have actually come under pressure after a period of strong development, with current data from the Dubai Land Department showing a drop in home mortgage transactions and money sales. However, we believe the threat of an enduring migrant outflow and a serious downturn in the realty sector is low.

As an enduring US-Iran deal takes shape, the fallout from the conflict has actually tightened local monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. Most GCC sovereigns bring fairly little debt and funding threats are therefore restricted in the UAE, the central bank's liquidity management has alleviated instant concerns.

That stated, Bahrain has had the ability to count 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 area since the war began. High-frequency financial information underscore the stress on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Driving Industrial Success via Global Diversification

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 surge in spending, particularly on subsidies, showing contingency outlays connected to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the deficit spending to the biggest considering that 2017.

GCC inflation dynamics stay uneven, with food costs the primary source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively suppressed in Saudi Arabia, likely reflecting the mitigating impact of its bigger domestic food production base and greater supply-chain resilience.

We continue to view cost pressures as largely transitory rather than a sign of a sustained inflationary cycle. Accordingly, we expect average inflation to relieve to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we expect the US Federal Reserve to keep rates of interest on hold up until December, and local rate policies to do the same.

We anticipate 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 essential profits and FX inflows, have been reduced by the United States marine blockade, while non-oil activity has actually been significantly struck. In Iraq, oil exports have collapsed to a trickle and we're anticipating 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 international economy after more than a years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the gradual reopening of local trade links.

Top International Capital Avenues in the GCC Region

The World Bank has actually slashed its 2026 development 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 infrastructure, had interrupted markets, increased financial volatility, and damaged 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 Poverty Outlook anticipates that the area's aggregate (excluding the Iran) GDP development will decrease to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has actually been devalued by 2.4 percentage points because the January forecasts, showing the unfavorable effects of the ongoing dispute.

Saudi Arabia: Forecast was devalued by 1.2 percentage points because January. Growth 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 strongest amongst Gulf economies. United Arab Emirates: Development projection for the UAE has fallen by 2.7 percentage points given that January.

Qatar: Significantly, development forecast for the Qatari economy has seen a sharp decrease of 11.0 percentage points because January. The economy is now expected to tape-record a contraction of 5.7%, down from an estimated growth of 5.3%, due to serious blockage to melted gas materials. Qatar is an essential gamer in the worldwide energy market, with a worldwide market share of liquefied gas (LNG) materials ranging in 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 country's financial lifeline, immediately stopping revenue inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has actually decreased by 1.8 portion points because January.