The Future Investment Climate of Arabia

Residential or commercial property costs have come under pressure after a duration of strong growth, with current information from the Dubai Land Department showing a drop in home mortgage transactions and money sales. Nonetheless, we think the threat of a lasting migrant outflow and a severe decline in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. Most GCC sovereigns bring reasonably little financial obligation and financing risks are therefore restricted in the UAE, the reserve bank's liquidity management has alleviated instant concerns.

That said, Bahrain has been able to count on support 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 because the war began. High-frequency fiscal data underscore the stress on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Driving Economic Growth through Strategic Diversification

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil profits and a surge in spending, especially on aids, reflecting contingency investments connected to the regional environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas profits to a halt, swelling the spending plan deficit to the largest considering that 2017.

GCC inflation characteristics stay unequal, with food prices the main source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably controlled in Saudi Arabia, most likely reflecting the mitigating effect of its bigger domestic food production base and higher supply-chain strength.

We continue to view cost pressures as mostly transitory instead of indicative of a sustained inflationary cycle. Appropriately, we anticipate average inflation to reduce 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 US Federal Reserve to keep rates of interest on hold till December, and local rate policies to follow fit.

We anticipate Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which offer necessary income and FX inflows, have been cut by the United States marine blockade, while non-oil activity has been significantly hit. 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 decade of civil war. We expect GDP development to typical 9.6% over 2026-2027, supported by restored financial investment, particularly in banking and energy, financial reforms, and the progressive reopening of regional trade links.

Essential Stock Market Insights for Regional Investors

The World Bank has slashed its 2026 growth forecast for Middle East economies, saying general GDP growth 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 actually disrupted markets, increased monetary volatility, and compromised 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 area's aggregate (omitting the Iran) GDP development will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has actually been reduced by 2.4 percentage points considering that the January forecasts, reflecting the unfavorable effects of the continuous conflict.

Saudi Arabia: Projection was reduced by 1.2 percentage points given that January. Development is now expected 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: Development projection for the UAE has fallen by 2.7 portion points given that January.

Qatar: Significantly, development projection for the Qatari economy has seen a sharp decline of 11.0 percentage points considering that January. The economy is now anticipated to tape a contraction of 5.7%, down from an approximated development of 5.3%, due to extreme obstruction to liquefied gas products. Qatar is a crucial gamer in the global energy market, with an international market share of melted gas (LNG) products varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Consequently, closing the strait would imply a total shutdown of the country's financial lifeline, instantly stopping income inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has actually decreased by 1.8 portion points considering that January.