Key Industrial Expansion in the Future

Property costs have actually come under pressure after a period of strong development, with recent data from the Dubai Land Department showing a drop in home mortgage deals and cash sales. We think the threat of a lasting migrant outflow and a serious recession in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened up local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. Most GCC sovereigns carry relatively little financial obligation and funding dangers are for that reason limited in the UAE, the main bank's liquidity management has alleviated instant issues.

That said, Bahrain has actually had the ability to count 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 region because the war began. High-frequency financial data underscore the strain on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Mastering Wealth Diversification for a 2026 Economy

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, especially on aids, reflecting contingency expenses connected to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the deficit spending to the biggest given that 2017.

GCC inflation characteristics stay unequal, with food rates the primary source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably subdued in Saudi Arabia, most likely showing the mitigating result of its bigger domestic food production base and greater supply-chain strength.

We continue to see rate pressures as mostly temporal instead of a sign of a continual inflationary cycle. Accordingly, we anticipate average inflation to reduce to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume slowly, we anticipate the United States Federal Reserve to keep rate of interest on hold till December, and local rate policies to follow fit.

We anticipate Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which offer important earnings and FX inflows, have been curtailed by the US naval blockade, while non-oil activity has been severely struck. In Iraq, oil exports have actually collapsed to a trickle and we're forecasting 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 international economy after more than a years of civil war. We prepare for GDP development to average 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, financial reforms, and the steady reopening of local trade links.

Advancing Non-Oil Growth via Strategic Diversification

The World Bank has slashed its 2026 growth forecast for Middle East economies, saying general GDP growth in the region is expected to slow from an estimated 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 actually interfered with markets, increased financial volatility, and weakened the 2026 development 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 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 projection has actually been downgraded by 2.4 portion points given that the January projections, reflecting the adverse impacts of the continuous conflict.

Saudi Arabia: Forecast was downgraded by 1.2 percentage points considering that January. Development is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook remains the strongest amongst Gulf economies. United Arab Emirates: Development projection for the UAE has fallen by 2.7 percentage points considering that January.

Qatar: Significantly, growth projection for the Qatari economy has actually 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 estimated development of 5.3%, due to severe blockage to liquefied gas products. Qatar is a key player in the global energy market, with a global market share of melted natural gas (LNG) materials ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would suggest a total shutdown of the country's monetary lifeline, right away stopping income inflows to the state spending plan. Bahrain: Growth forecast for Bahrain's economy has declined by 1.8 percentage points given that January.