Why Economic Shifts Can Shape GCC Markets

Home costs have actually come under pressure after a period of strong development, with current data from the Dubai Land Department revealing a drop in home loan deals and cash sales. We think the risk of a lasting migrant outflow and a serious downturn in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has tightened regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. Many GCC sovereigns bring reasonably little financial obligation and financing dangers are therefore limited in the UAE, the central bank's liquidity management has actually minimized instant concerns.

That stated, Bahrain has been able to depend on support 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 given that the war started. High-frequency fiscal information highlight the stress on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Key International Investment Avenues for the GCC Region

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 earnings and a rise in costs, especially on aids, showing contingency outlays tied to the regional environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the deficit spending to the largest given that 2017.

GCC inflation dynamics remain irregular, with food rates the primary source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively suppressed in Saudi Arabia, most likely reflecting the mitigating effect of its bigger domestic food production base and higher supply-chain strength.

We continue to see rate pressures as largely temporal rather than a sign of a sustained inflationary cycle. Accordingly, we expect typical inflation to ease to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we anticipate the US Federal Reserve to keep interest rates on hold till December, and regional 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 supply necessary profits and FX inflows, have been reduced by the US naval blockade, while non-oil activity has been significantly hit. 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 decade of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, financial reforms, and the steady reopening of regional trade links.

Assessing GCC Market Resilience in 2026

The World Bank has slashed its 2026 growth projection for Middle East economies, saying overall GDP growth in the region 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 destruction of energy and public facilities, had interrupted markets, increased financial volatility, and deteriorated 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 development will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has been reduced by 2.4 percentage points given that the January projections, showing the negative effects of the ongoing dispute.

Saudi Arabia: Forecast was devalued by 1.2 percentage 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 among Gulf economies. United Arab Emirates: Development projection for the UAE has fallen by 2.7 percentage points given that January.

Qatar: Notably, development projection for the Qatari economy has seen a sharp decline of 11.0 portion points since January. The economy is now anticipated to record a contraction of 5.7%, down from an approximated development of 5.3%, due to severe blockage to liquefied gas products. Qatar is a key gamer in the global energy market, with a worldwide market share of liquefied natural gas (LNG) materials ranging in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would mean a total shutdown of the nation's financial lifeline, instantly stopping profits inflows to the state spending plan. Bahrain: Development forecast for Bahrain's economy has actually decreased by 1.8 portion points given that January.