Driving Non-Oil Success through Global Diversification

Property costs have actually come under pressure after a period of strong development, with current information from the Dubai Land Department showing a drop in mortgage transactions and money sales. Nevertheless, we think the risk of an enduring migrant outflow and a serious decline in the property sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the dispute has tightened up local financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker financier sentiment. Most GCC sovereigns bring reasonably little financial obligation and funding risks are for that reason limited in the UAE, the main bank's liquidity management has actually minimized instant concerns.

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 because the war began. High-frequency fiscal information underscore the stress on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Future Business Climate of Arabia

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 profits and a surge in spending, especially on aids, reflecting contingency investments tied to the regional environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the budget deficit to the largest since 2017.

GCC inflation dynamics stay unequal, with food prices the primary source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably controlled in Saudi Arabia, likely showing the mitigating impact of its bigger domestic food production base and greater supply-chain strength.

We continue to see rate pressures as mostly transitory rather than indicative of a continual inflationary cycle. Appropriately, we anticipate typical inflation to relieve to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume gradually, we expect the US Federal Reserve to keep rates 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 anticipate a 9.4% contraction three months ago). Oil production and exports, which offer necessary revenue and FX inflows, have been cut by the US naval blockade, while non-oil activity has been significantly struck. 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 global economy after more than a years of civil war. We anticipate GDP development to average 9.6% over 2026-2027, supported by renewed financial investment, particularly in banking and energy, financial reforms, and the gradual resuming of local trade links.

Key Foreign Investment Prospects in the GCC Region

The World Bank has actually slashed its 2026 development projection for Middle East economies, saying general GDP growth in the area is anticipated to slow from an approximated 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 growth 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 area's aggregate (omitting the Iran) GDP development will slow down to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has actually been reduced by 2.4 portion points since the January projections, showing the unfavorable results of the ongoing conflict.

Saudi Arabia: Forecast was reduced 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 forecast for the UAE has actually fallen by 2.7 percentage points given that January.

Qatar: Notably, growth forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points considering that January. The economy is now expected to record a contraction of 5.7%, below an approximated development of 5.3%, due to severe obstruction to melted gas supplies. Qatar is a crucial player in the global energy market, with a global market share of liquefied natural gas (LNG) supplies ranging 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 profits inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 portion points because January.