2026 Business Climate in the GCC

Home prices have come under pressure after a period of strong growth, with current information from the Dubai Land Department showing a drop in home loan deals and cash sales. Nevertheless, we believe the risk of a lasting migrant outflow and a serious decline in the realty sector is low.

As a lasting US-Iran deal takes shape, the fallout from the dispute has tightened up regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. Most GCC sovereigns carry fairly little financial obligation and financing risks are therefore limited in the UAE, the main bank's liquidity management has actually reduced immediate issues.

That said, Bahrain has actually had the ability to rely on assistance from neighbours, consisting of 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 started. High-frequency fiscal data underscore the strain on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Critical Equity Market Strategies for Regional Growth

In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil revenue and a rise in spending, especially on subsidies, showing contingency expenses tied 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 deficit to the biggest since 2017.

GCC inflation characteristics remain irregular, with food prices the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably controlled 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 mainly temporal rather than a sign of a continual inflationary cycle. Appropriately, we anticipate 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 slowly, we expect the United States Federal Reserve to keep rates of interest on hold up 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 earnings and FX inflows, have actually been reduced by the US naval blockade, while non-oil activity has been severely struck. In Iraq, oil exports have actually collapsed to a drip and we're forecasting 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 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 progressive resuming of regional trade links.

Key Foreign Investment Avenues for the GCC Region

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, saying overall GDP development in the area is anticipated to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and destruction of energy and public infrastructure, had actually 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 slow down to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 projection has been reduced by 2.4 percentage points because the January forecasts, reflecting the adverse impacts of the continuous conflict.

Saudi Arabia: Projection was downgraded by 1.2 portion points considering that January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook stays the greatest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 percentage points considering that January.

Qatar: Especially, 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 record a contraction of 5.7%, below an approximated development of 5.3%, due to serious blockage to melted gas products. Qatar is a crucial gamer in the global energy market, with a worldwide market share of liquefied gas (LNG) materials varying between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Consequently, closing the strait would indicate a complete shutdown of the nation's monetary lifeline, immediately halting profits inflows to the state budget plan. Bahrain: Development projection for Bahrain's economy has decreased by 1.8 portion points given that January.