Accelerating Economic Growth through Strategic Diversification

Residential or commercial property prices have actually come under pressure after a duration of strong growth, with current information from the Dubai Land Department showing a drop in home mortgage deals and cash sales. We think the danger of an enduring migrant outflow and an extreme downturn in the genuine estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the dispute has actually tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. Many GCC sovereigns bring relatively little debt and financing threats are for that reason restricted in the UAE, the central bank's liquidity management has actually eased instant concerns.

That stated, Bahrain has had the ability 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 given that the war began. High-frequency financial data underscore the stress on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Foreign Investment Opportunities across the GCC

In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil revenue and a rise in spending, particularly on subsidies, 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 since 2017.

GCC inflation dynamics remain uneven, with food rates the main source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably suppressed in Saudi Arabia, likely reflecting the mitigating impact of its bigger domestic food production base and greater supply-chain durability.

We continue to see cost pressures as mainly temporal instead of indicative of a continual inflationary cycle. Accordingly, we anticipate 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 likely set to resume slowly, we expect the United States 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 forecast a 9.4% contraction three months ago). Oil production and exports, which provide vital revenue and FX inflows, have actually been cut by the United States marine blockade, while non-oil activity has been significantly struck. In Iraq, oil exports have actually collapsed to a drip 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 global economy after more than a years of civil war. We prepare for GDP growth to average 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, monetary reforms, and the progressive reopening of regional trade links.

Evaluating GCC Investment Potential in 2026

The World Bank has slashed its 2026 development projection for Middle East economies, saying general 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 actually interrupted markets, increased financial volatility, and damaged 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 Hardship Outlook forecasts that the area's aggregate (excluding the Iran) GDP growth will decrease to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has been downgraded by 2.4 percentage points considering that the January projections, reflecting the negative effects of the ongoing dispute.

Saudi Arabia: Projection was reduced by 1.2 percentage points given that January. Growth is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the greatest amongst Gulf economies. United Arab Emirates: Growth forecast for the UAE has actually fallen by 2.7 portion points given that January.

Qatar: Significantly, growth forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points given that January. The economy is now expected to tape a contraction of 5.7%, down from an estimated development of 5.3%, due to serious blockage to melted gas products. Qatar is a crucial gamer in the worldwide energy market, with a global market share of liquefied natural gas (LNG) products varying in between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would imply a complete shutdown of the country's financial lifeline, immediately stopping income inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has actually decreased by 1.8 percentage points considering that January.