Positioning GCC Portfolios against 2026 Shifts

Property prices have actually come under pressure after a period of strong growth, with recent information from the Dubai Land Department showing a drop in home mortgage deals and money sales. Nevertheless, we think the danger of an enduring migrant outflow and a severe decline in the real estate sector is low.

As an enduring US-Iran offer takes shape, the fallout from the dispute has actually tightened local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. A lot of GCC sovereigns carry reasonably little financial obligation and financing risks are for that reason restricted in the UAE, the reserve bank's liquidity management has minimized instant concerns.

That stated, Bahrain has actually been able to count on support 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 began. High-frequency financial information underscore the pressure on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Global Capital Prospects within the Middle East

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 revenue and a surge in costs, especially on subsidies, showing contingency expenses connected to the regional environment and a velocity 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 characteristics remain uneven, with food costs the primary source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably suppressed in Saudi Arabia, likely showing the mitigating impact of its larger domestic food production base and higher supply-chain durability.

We continue to view price pressures as mostly temporal rather than a sign of a sustained inflationary cycle. Appropriately, we anticipate average inflation to reduce to 2.1% y/y in 2027 as short-lived 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 interest rates on hold until December, and local rate policies to follow suit.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which provide necessary income and FX inflows, have actually been curtailed by the United States marine blockade, while non-oil activity has 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 international economy after more than a years of civil war. We anticipate GDP growth to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the gradual resuming of local trade links.

Emerging Equity Market Trends in 2026

The World Bank has slashed its 2026 development forecast for Middle East economies, stating total GDP growth in the area is anticipated to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and damage of energy and public infrastructure, had interrupted markets, increased financial volatility, and compromised 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 (omitting 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 since the January forecasts, reflecting the negative effects of the ongoing conflict.

Saudi Arabia: Projection was devalued by 1.2 portion points given that January. Development is now expected 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: Development projection for the UAE has actually fallen by 2.7 portion points considering that January.

Qatar: Especially, development forecast for the Qatari economy has seen a sharp decline of 11.0 percentage points considering that January. The economy is now expected to tape a contraction of 5.7%, below an estimated development of 5.3%, due to severe obstruction to melted gas products. Qatar is a key player in the global energy market, with an international market share of liquefied gas (LNG) materials varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Consequently, closing the strait would mean a total shutdown of the country's financial lifeline, immediately halting earnings inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has declined by 1.8 portion points because January.