Accelerating Industrial Success through Strategic Diversification

Residential or commercial property rates have actually come under pressure after a duration of strong development, with current data from the Dubai Land Department revealing a drop in mortgage transactions and money sales. We think the danger of a long lasting migrant outflow and an extreme downturn in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened up local financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. Most GCC sovereigns bring reasonably little financial obligation and funding threats are for that reason limited in the UAE, the reserve bank's liquidity management has actually alleviated instant issues.

That said, 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 since the war started. High-frequency fiscal data highlight the strain on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Future-Proofing Middle East Investments against 2026 Shifts

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil income and a rise in costs, particularly on aids, showing contingency expenses connected to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas income to a halt, swelling the deficit spending to the biggest considering that 2017.

GCC inflation characteristics stay unequal, with food prices the main source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly subdued in Saudi Arabia, likely showing the mitigating effect of its bigger domestic food production base and greater supply-chain durability.

We continue to see price pressures as mostly temporal instead of a sign of a continual inflationary cycle. Accordingly, we expect average inflation to alleviate to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we anticipate the United States Federal Reserve to keep rate of interest on hold until December, and regional rate policies to follow match.

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 provide vital income and FX inflows, have actually been cut by the United States naval blockade, while non-oil activity has been badly hit. In Iraq, oil exports have actually collapsed to a trickle and we're anticipating 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 international economy after more than a decade of civil war. We expect GDP development to typical 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, financial reforms, and the progressive resuming of regional trade links.

Why Industrial Diversification Will Transform GCC Markets

The World Bank has slashed its 2026 development projection for Middle East economies, saying overall 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 tactical Strait of Hormuz, and damage of energy and public infrastructure, had actually interfered with markets, increased monetary 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 Poverty Outlook forecasts that the area's aggregate (excluding the Iran) GDP development will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has been devalued by 2.4 portion points given that the January projections, reflecting the negative impacts of the ongoing dispute.

Saudi Arabia: Forecast was downgraded by 1.2 portion points considering that January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the greatest among Gulf economies. United Arab Emirates: Development forecast for the UAE has actually fallen by 2.7 percentage points since January.

Qatar: Especially, growth projection for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points given that January. The economy is now anticipated to record a contraction of 5.7%, below an estimated development of 5.3%, due to severe obstruction to melted gas materials. Qatar is a key gamer in the international energy market, with a worldwide market share of melted natural gas (LNG) products ranging between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. As a result, closing the strait would imply a total shutdown of the nation's monetary lifeline, right away halting revenue inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has declined by 1.8 percentage points considering that January.