Securing Middle East Portfolios against 2026 Trends

Home rates have actually come under pressure after a period of strong development, with recent data from the Dubai Land Department showing a drop in home loan transactions and money sales. We believe the risk of an enduring migrant outflow and a severe recession in the real estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the dispute has tightened regional monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor belief. Many GCC sovereigns bring reasonably little financial obligation and financing dangers are for that reason restricted in the UAE, the main bank's liquidity management has eased immediate issues.

That said, Bahrain has had the ability to rely on support 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 because the war began. High-frequency fiscal data underscore the stress on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

International Capital Prospects within the Middle East

In Saudi Arabia, the budget 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 aids, showing contingency outlays tied to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the deficit spending to the biggest since 2017.

GCC inflation dynamics remain irregular, with food rates the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably subdued in Saudi Arabia, most likely reflecting the mitigating result of its larger domestic food production base and higher supply-chain strength.

We continue to see cost pressures as mostly transitory instead of indicative of a continual inflationary cycle. Accordingly, we anticipate typical inflation to relieve to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation elevated 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 up until December, and local rate policies to do the same.

We anticipate Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which offer vital earnings and FX inflows, have been reduced by the United States naval blockade, while non-oil activity has been significantly struck. 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 worldwide economy after more than a decade of civil war. We prepare for GDP growth to average 9.6% over 2026-2027, supported by restored financial investment, particularly in banking and energy, monetary reforms, and the gradual resuming of local trade links.

Analyzing GCC Investment Resilience in 2026

The World Bank has 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 damage of energy and public facilities, had disrupted markets, increased financial volatility, and weakened 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 forecasts that the region's aggregate (omitting the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has actually been devalued by 2.4 portion points considering that the January projections, reflecting the negative effects of the ongoing conflict.

Saudi Arabia: Projection was devalued by 1.2 portion points since 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 remains the strongest amongst Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 percentage points since January.

Qatar: Significantly, growth forecast for the Qatari economy has seen a sharp decrease of 11.0 portion points since January. The economy is now expected to tape-record a contraction of 5.7%, below an estimated development of 5.3%, due to severe blockage to liquefied gas materials. Qatar is an essential gamer in the international energy market, with a global market share of melted gas (LNG) supplies varying in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Subsequently, closing the strait would imply a complete shutdown of the country's financial lifeline, instantly halting revenue inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has declined by 1.8 portion points given that January.