Accelerating Economic Success through Global Diversification

Property rates have come under pressure after a duration of strong growth, with recent information from the Dubai Land Department revealing a drop in home mortgage transactions and cash sales. We think the risk of an enduring migrant outflow and a serious decline 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, broader bond spreads, and weaker investor belief. Many GCC sovereigns carry relatively little financial obligation and financing risks are therefore restricted in the UAE, the reserve bank's liquidity management has actually eased instant concerns.

That stated, Bahrain has actually had the ability to count on support 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 area given that the war started. High-frequency financial data highlight the strain on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Why Industrial Shifts Can Shape GCC Markets

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 earnings and a surge in spending, especially on subsidies, showing contingency investments connected to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the deficit spending to the largest because 2017.

GCC inflation dynamics stay uneven, with food prices the primary source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly controlled in Saudi Arabia, likely showing the mitigating impact of its larger domestic food production base and higher supply-chain strength.

We continue to see cost pressures as mostly temporal instead of indicative of a sustained inflationary cycle. Accordingly, we expect average inflation to ease to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we anticipate the United States Federal Reserve to keep rates of interest on hold until December, and regional rate policies to follow match.

We expect 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 important income and FX inflows, have actually been cut by the US naval blockade, while non-oil activity has actually been severely hit. 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 years of civil war. We anticipate GDP growth to average 9.6% over 2026-2027, supported by renewed financial investment, particularly in banking and energy, financial reforms, and the gradual resuming of local trade links.

GCC Equity Market Patterns for 2026

The World Bank has slashed its 2026 development forecast for Middle East economies, saying total 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 strategic Strait of Hormuz, and destruction of energy and public infrastructure, had actually interfered with markets, increased monetary volatility, and compromised 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 (leaving out the Iran) GDP growth will decrease to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 projection has actually been reduced by 2.4 percentage points since the January projections, showing the adverse impacts of the continuous conflict.

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

Qatar: Significantly, development forecast for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points because January. The economy is now anticipated to tape-record a contraction of 5.7%, below an approximated development of 5.3%, due to serious blockage to melted gas materials. Qatar is a crucial player in the international energy market, with a global market share of liquefied natural gas (LNG) products varying in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Subsequently, closing the strait would imply a total shutdown of the country's monetary lifeline, instantly halting earnings inflows to the state budget. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 percentage points given that January.