Foreign Capital Prospects within the GCC

Property prices have actually come under pressure after a period of strong growth, with current data from the Dubai Land Department revealing a drop in home loan deals and cash sales. We think the danger of an enduring migrant outflow and a serious downturn in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has tightened regional financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker financier belief. Most GCC sovereigns carry fairly little financial obligation and funding dangers are for that reason restricted in the UAE, the main bank's liquidity management has minimized immediate issues.

That said, Bahrain has actually had the ability to depend on assistance from neighbours, including Saudi Arabia and the UAE, and it effectively 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 data underscore the pressure on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Assessing GCC Market Resilience in 2026

In Saudi Arabia, the spending 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 spending, particularly on subsidies, showing contingency outlays tied to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the deficit spending to the biggest because 2017.

GCC inflation dynamics remain unequal, with food costs the main 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 impact of its larger domestic food production base and greater supply-chain resilience.

We continue to view rate pressures as largely transitory instead of indicative of a continual inflationary cycle. Appropriately, we expect typical 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 slowly, we anticipate the US Federal Reserve to keep interest rates on hold up until December, and local rate policies to follow fit.

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 provide important revenue and FX inflows, have been reduced by the United States naval blockade, while non-oil activity has been seriously hit. In Iraq, oil exports have collapsed to a drip 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 global economy after more than a decade of civil war. We expect GDP growth to average 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, monetary reforms, and the gradual resuming of local trade links.

Future-Proofing GCC Portfolios against 2026 Shifts

The World Bank has actually slashed its 2026 development forecast for Middle East economies, stating total GDP development 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 interfered with markets, increased financial volatility, and compromised 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 forecasts that the area's aggregate (excluding the Iran) GDP growth will decrease to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has actually been downgraded by 2.4 percentage points because the January projections, reflecting the adverse effects of the continuous conflict.

Saudi Arabia: Forecast was devalued by 1.2 portion points considering that January. Development 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 strongest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has fallen by 2.7 percentage points because January.

Qatar: Especially, growth projection for the Qatari economy has actually seen a sharp decline of 11.0 percentage points considering that January. The economy is now expected to tape a contraction of 5.7%, down from an estimated growth of 5.3%, due to severe blockage to liquefied gas materials. Qatar is an essential gamer in the international energy market, with an international market share of melted gas (LNG) products varying in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would suggest a complete shutdown of the country's monetary lifeline, immediately stopping income inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has actually decreased by 1.8 portion points given that January.