Future-Proofing Middle East Investments for 2026 Shifts

Property costs have come under pressure after a duration of strong growth, with current data from the Dubai Land Department showing a drop in home loan transactions and cash sales. We believe the risk of a lasting migrant outflow and an extreme decline in the real estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier belief. A lot of GCC sovereigns bring relatively little financial obligation and funding threats are therefore restricted in the UAE, the main bank's liquidity management has minimized instant issues.

That said, Bahrain has 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 first offering from the region because the war began. High-frequency financial information highlight the strain on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Driving Non-Oil Success through Global Diversification

In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil revenue and a rise in costs, particularly on aids, showing contingency outlays tied to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the deficit spending to the largest considering that 2017.

GCC inflation characteristics remain irregular, with food costs the main source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably subdued 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 cost pressures as mainly transitory rather than indicative of a sustained inflationary cycle. Appropriately, we expect average inflation to alleviate to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume slowly, we anticipate the US Federal Reserve to keep interest rates on hold till December, and regional rate policies to follow fit.

We anticipate 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 necessary income and FX inflows, have actually been cut by the United States marine blockade, while non-oil activity has actually been severely struck. In Iraq, oil exports have collapsed to a drip 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 global economy after more than a years of civil war. We anticipate GDP development to average 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, financial reforms, and the progressive reopening of regional trade links.

Future-Proofing GCC Portfolios for 2026 Shifts

The World Bank has actually slashed its 2026 growth forecast 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 tactical Strait of Hormuz, and damage of energy and public facilities, had actually interfered with markets, increased monetary volatility, and weakened the 2026 development 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 forecasts that the region's aggregate (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 projection has been devalued by 2.4 portion points because the January forecasts, showing the negative effects of the continuous conflict.

Saudi Arabia: Projection was reduced by 1.2 percentage points considering that January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook remains the greatest amongst Gulf economies. United Arab Emirates: Development projection for the UAE has actually fallen by 2.7 portion points since January.

Qatar: Notably, growth projection for the Qatari economy has seen a sharp decline of 11.0 portion points because January. The economy is now anticipated to tape-record a contraction of 5.7%, below an estimated growth of 5.3%, due to serious obstruction to melted gas supplies. Qatar is an essential player in the global energy market, with a worldwide market share of melted gas (LNG) products ranging between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would imply a complete shutdown of the nation's monetary lifeline, instantly halting income inflows to the state budget. Bahrain: Development projection for Bahrain's economy has actually decreased by 1.8 percentage points since January.