Accelerating Non-Oil Success through Strategic Diversification

Property rates have come under pressure after a period of strong growth, with current information from the Dubai Land Department showing a drop in mortgage deals and cash sales. Nevertheless, we believe the danger of an enduring migrant outflow and an extreme recession in the property sector is low.

As an enduring US-Iran offer takes shape, the fallout from the conflict has actually tightened up local financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker financier belief. Most GCC sovereigns bring fairly little debt and funding dangers are for that reason restricted in the UAE, the main bank's liquidity management has actually eased immediate concerns.

That stated, Bahrain has been able to depend on assistance 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 considering that the war started. High-frequency financial data underscore the stress on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Positioning Middle East Investments against 2026 Trends

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 earnings and a surge in costs, particularly on aids, reflecting contingency outlays connected to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a halt, swelling the deficit spending to the largest considering that 2017.

GCC inflation characteristics remain unequal, with food prices the primary source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably suppressed in Saudi Arabia, likely showing the mitigating result of its larger domestic food production base and higher supply-chain resilience.

We continue to view rate pressures as mostly transitory instead of a sign of a continual inflationary cycle. Appropriately, we expect average inflation to ease to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume gradually, we anticipate the United States Federal Reserve to keep rates of interest on hold up until December, and local rate policies to do the same.

We anticipate Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which supply vital revenue and FX inflows, have actually been curtailed by the United States marine blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have 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 prepare for GDP growth to average 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, financial reforms, and the progressive resuming of local trade links.

Assessing GCC Investment Resilience in 2026

The World Bank has slashed its 2026 growth forecast for Middle East economies, stating overall 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 tactical Strait of Hormuz, and destruction of energy and public infrastructure, had actually disrupted markets, increased financial volatility, and compromised the 2026 development outlook, the World Bank Group stated in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.

The April 2026 World Bank's Macro Hardship Outlook anticipates that the region's aggregate (excluding the Iran) GDP development will decelerate to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has actually been downgraded by 2.4 percentage points considering that the January projections, reflecting the unfavorable results of the ongoing dispute.

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

Qatar: Especially, development projection for the Qatari economy has seen a sharp decline of 11.0 portion points since January. The economy is now expected to tape a contraction of 5.7%, down from an estimated development of 5.3%, due to extreme obstruction to liquefied gas materials. Qatar is an essential player in the global energy market, with an international market share of liquefied natural gas (LNG) products ranging in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its crude oil and derivatives. Subsequently, closing the strait would suggest a complete shutdown of the country's monetary lifeline, right away stopping income inflows to the state budget. Bahrain: Growth projection for Bahrain's economy has declined by 1.8 percentage points since January.