Key Economic Expansion in the Future

Property rates have actually come under pressure after a duration of strong growth, with current data from the Dubai Land Department revealing a drop in mortgage transactions and cash sales. We believe the risk of an enduring migrant outflow and an extreme slump in the real estate sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened regional monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. Many GCC sovereigns carry fairly little financial obligation and financing threats are therefore limited in the UAE, the main bank's liquidity management has minimized immediate concerns.

That stated, Bahrain has been able to depend 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 very first offering from the area given that the war began. High-frequency fiscal information underscore the pressure on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Future Middle Eastern Market Projections

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 costs, particularly on aids, reflecting contingency outlays connected to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the deficit spending to the largest because 2017.

GCC inflation characteristics remain irregular, with food rates the main source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly suppressed in Saudi Arabia, most likely showing the mitigating result of its larger domestic food production base and greater supply-chain durability.

We continue to view rate pressures as largely temporal instead of a sign of a continual inflationary cycle. Appropriately, we expect typical inflation to reduce to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume slowly, we anticipate the United States Federal Reserve to keep interest rates on hold up until December, and local rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which offer necessary revenue and FX inflows, have actually been curtailed by the US naval blockade, while non-oil activity has actually been significantly hit. In Iraq, oil exports have collapsed to a trickle and we're anticipating 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 expect GDP development to typical 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, monetary reforms, and the steady reopening of regional trade links.

Optimizing Capital Diversification for a 2026 Economy

The World Bank has actually slashed its 2026 development projection 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 tactical Strait of Hormuz, and destruction of energy and public facilities, had disrupted markets, increased financial volatility, and weakened 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 region's aggregate (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has actually been devalued by 2.4 portion points considering that the January forecasts, reflecting the negative results of the continuous conflict.

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

Qatar: Notably, growth projection for the Qatari economy has actually seen a sharp decrease of 11.0 portion points considering that January. The economy is now anticipated to tape a contraction of 5.7%, below an approximated development of 5.3%, due to extreme obstruction to melted gas materials. Qatar is a key player in the international energy market, with a global market share of liquefied gas (LNG) products ranging between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would indicate a total shutdown of the country's financial lifeline, right away halting earnings inflows to the state budget. Bahrain: Development forecast for Bahrain's economy has actually declined by 1.8 percentage points because January.