Critical Equity Market Insights for Regional Growth

Residential or commercial property prices have come under pressure after a duration of strong growth, with recent information from the Dubai Land Department showing a drop in mortgage deals and money sales. We believe the risk of a long lasting migrant outflow and an extreme downturn in the genuine estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. A lot of GCC sovereigns carry reasonably little financial obligation and financing dangers are therefore restricted in the UAE, the main bank's liquidity management has actually alleviated immediate issues.

That said, Bahrain has been able to rely on assistance from neighbours, including Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the very first offering from the region because the war began. High-frequency financial data highlight the pressure on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Accelerating Economic Success through Strategic Diversification

In Saudi Arabia, the spending 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 subsidies, reflecting contingency expenses tied to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a stop, swelling the budget deficit to the biggest given that 2017.

GCC inflation characteristics stay irregular, with food costs the primary source of upward pressure and inflation in this classification strengthening 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 greater supply-chain resilience.

We continue to see rate pressures as mostly temporal instead of indicative of a sustained inflationary cycle. Accordingly, we expect typical 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 most likely set to resume gradually, we anticipate the United States Federal Reserve to keep interest rates on hold till December, and regional rate policies to follow fit.

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 offer essential earnings and FX inflows, have actually been reduced by the United States marine blockade, while non-oil activity has been seriously struck. In Iraq, oil exports have actually collapsed to a trickle 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 growth to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the progressive reopening of regional trade links.

How Economic Shifts Will Transform GCC Markets

The World Bank has actually slashed its 2026 development projection for Middle East economies, saying total GDP development in the region 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 facilities, had interrupted markets, increased financial volatility, and deteriorated 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 Poverty Outlook anticipates that the region's aggregate (excluding the Iran) GDP growth will decrease to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has actually been devalued by 2.4 portion points given that the January projections, showing the unfavorable results of the ongoing dispute.

Saudi Arabia: Forecast was reduced by 1.2 percentage points because January. Development 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 forecast for the UAE has fallen by 2.7 portion points given that January.

Qatar: Especially, growth forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points since January. The economy is now expected to tape a contraction of 5.7%, down from an estimated development of 5.3%, due to extreme blockage to liquefied gas products. Qatar is an essential player in the global energy market, with a worldwide market share of melted natural gas (LNG) products varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would mean a total shutdown of the nation's financial lifeline, instantly stopping revenue inflows to the state budget. Bahrain: Growth projection for Bahrain's economy has decreased by 1.8 percentage points since January.