GCC Equity Market Trends for 2026

Property prices have actually come under pressure after a period of strong growth, with recent information from the Dubai Land Department revealing a drop in mortgage deals and cash sales. We believe the danger of a long lasting migrant outflow and an extreme slump in the real estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has tightened regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. A lot of GCC sovereigns carry fairly little debt and financing dangers are therefore restricted in the UAE, the central bank's liquidity management has actually minimized instant concerns.

That said, Bahrain has actually been able to rely on assistance from neighbours, including Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the very first offering from the region considering that the war began. High-frequency fiscal information highlight the pressure on regional public finances from the conflict.

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In Saudi Arabia, the budget plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil revenue and a surge in spending, particularly on subsidies, showing contingency investments tied to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a stop, swelling the budget deficit to the biggest because 2017.

GCC inflation characteristics stay unequal, with food costs the main source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably controlled in Saudi Arabia, likely reflecting the mitigating result of its larger domestic food production base and greater supply-chain resilience.

We continue to view cost pressures as mainly transitory rather than indicative of a continual inflationary cycle. Accordingly, we anticipate average inflation to relieve 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 slowly, we expect the US Federal Reserve to keep rates of interest on hold 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 revenue and FX inflows, have been cut by the US naval blockade, while non-oil activity has been seriously struck. 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 international economy after more than a years of civil war. We prepare for GDP growth to average 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, financial reforms, and the progressive resuming of regional trade links.

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The World Bank has slashed its 2026 growth forecast for Middle East economies, stating total GDP growth in the region 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 disrupted markets, increased monetary volatility, and weakened 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 forecasts that the area's aggregate (leaving out the Iran) GDP development will slow down to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has been devalued by 2.4 portion points because the January projections, showing the unfavorable results of the continuous conflict.

Saudi Arabia: Projection was downgraded by 1.2 portion points considering that January. Development is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook remains the greatest among Gulf economies. United Arab Emirates: Development forecast for the UAE has actually fallen by 2.7 portion points because January.

Qatar: Significantly, growth projection for the Qatari economy has seen a sharp decrease of 11.0 percentage points considering that January. The economy is now expected to record a contraction of 5.7%, down from an approximated growth of 5.3%, due to extreme obstruction to melted gas materials. Qatar is a crucial player in the global energy market, with a worldwide market share of liquefied natural gas (LNG) supplies varying between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would imply a total shutdown of the country's monetary lifeline, immediately stopping earnings inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 percentage points given that January.