Upcoming Middle Eastern Market Outlook

Property costs have actually come under pressure after a period of strong development, with recent information from the Dubai Land Department revealing a drop in mortgage deals and money sales. We think the danger of a long lasting migrant outflow and an extreme slump in the real estate sector is low.

As an enduring US-Iran offer takes shape, the fallout from the conflict has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. A lot of GCC sovereigns carry relatively little debt and financing dangers are for that reason restricted in the UAE, the main bank's liquidity management has eased immediate issues.

That said, Bahrain has actually had the ability to count on assistance from neighbours, consisting of Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the area since the war began. High-frequency fiscal information highlight the strain on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Critical Equity Market Strategies for GCC Investors

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 rise in costs, particularly on subsidies, showing contingency expenses connected to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the deficit spending to the largest considering that 2017.

GCC inflation dynamics stay irregular, with food prices the primary source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively subdued in Saudi Arabia, most likely showing the mitigating effect of its bigger domestic food production base and higher supply-chain strength.

We continue to see price pressures as largely temporal rather than a sign of a continual inflationary cycle. Appropriately, we expect average inflation to alleviate to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume gradually, we expect the US Federal Reserve to keep interest rates on hold until December, and local rate policies to follow suit.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which supply essential profits and FX inflows, have been curtailed by the US naval blockade, while non-oil activity has been seriously struck. 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 worldwide 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, financial reforms, and the progressive reopening of regional trade links.

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The World Bank has actually slashed its 2026 growth forecast for Middle East economies, saying total GDP development in the region is expected to slow from an approximated 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 interrupted markets, increased monetary volatility, and compromised 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 anticipates that the area's aggregate (excluding the Iran) GDP development will slow down to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has actually been devalued by 2.4 portion points because the January projections, reflecting the negative effects of the ongoing dispute.

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

Qatar: Especially, development forecast for the Qatari economy has actually seen a sharp decline of 11.0 portion points given that January. The economy is now anticipated to tape a contraction of 5.7%, down from an approximated growth of 5.3%, due to extreme obstruction to melted gas products. Qatar is a key gamer in the global energy market, with an international market share of melted gas (LNG) materials varying in between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would imply a total shutdown of the nation's financial lifeline, instantly halting earnings inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 percentage points considering that January.