Driving Non-Oil Growth via Global Diversification

Property rates have come under pressure after a period of strong development, with current information from the Dubai Land Department showing a drop in mortgage deals and money sales. Nevertheless, we believe the risk of a lasting migrant outflow and an extreme recession in the genuine estate sector is low.

As an enduring US-Iran offer takes shape, the fallout from the conflict has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. A lot of GCC sovereigns carry reasonably little financial obligation and funding threats are therefore limited in the UAE, the reserve bank's liquidity management has relieved immediate concerns.

That stated, Bahrain has been able 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 very first offering from the area considering that the war started. High-frequency financial data underscore the pressure on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

2026 Regional Economic Outlook

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 profits and a rise in costs, especially on aids, showing contingency investments tied to the regional environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the budget deficit to the biggest given that 2017.

GCC inflation dynamics remain unequal, with food rates the main 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 reflecting the mitigating effect of its bigger domestic food production base and greater supply-chain resilience.

We continue to view price pressures as largely transitory instead of indicative of a sustained inflationary cycle. Appropriately, we anticipate average inflation to alleviate to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume gradually, we expect the United States Federal Reserve to keep rates of interest on hold until December, and regional rate policies to follow suit.

We expect Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which supply vital revenue and FX inflows, have actually been reduced by the US marine blockade, while non-oil activity has actually been severely hit. In Iraq, oil exports have actually 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 worldwide economy after more than a years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by renewed financial investment, particularly in banking and energy, monetary reforms, and the steady reopening of local trade links.

Foreign Capital Prospects within the GCC

The World Bank has actually slashed its 2026 development projection for Middle East economies, stating general 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 facilities, had disrupted markets, increased financial 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 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 portion points because the January projections, showing the unfavorable effects of the ongoing dispute.

Saudi Arabia: Projection was reduced by 1.2 portion points considering that 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 projection for the UAE has fallen by 2.7 percentage points since January.

Qatar: Significantly, 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 tape a contraction of 5.7%, below an estimated growth of 5.3%, due to extreme obstruction to liquefied gas supplies. Qatar is a key gamer in the global energy market, with an international market share of liquefied natural gas (LNG) products varying between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would mean a complete shutdown of the country's monetary lifeline, instantly stopping income inflows to the state spending plan. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 portion points considering that January.