Why Economic Shifts Can Shape GCC Markets

Residential or commercial property costs have actually come under pressure after a period of strong growth, with recent information from the Dubai Land Department revealing a drop in home loan transactions and cash sales. Nevertheless, we believe the danger of an enduring migrant outflow and an extreme downturn in the property sector is low.

As an enduring US-Iran offer takes shape, the fallout from the dispute has actually tightened local financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor sentiment. The majority of GCC sovereigns bring relatively little debt and funding threats are for that reason limited in the UAE, the central bank's liquidity management has actually alleviated instant concerns.

That said, Bahrain has actually had the ability to count 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 very first offering from the region considering that the war began. High-frequency fiscal data highlight the strain on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Driving Industrial Success via Global Diversification

In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil earnings and a rise in costs, particularly on aids, reflecting contingency outlays connected to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a halt, swelling the deficit spending to the largest because 2017.

GCC inflation dynamics remain unequal, with food costs the primary source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively suppressed in Saudi Arabia, most likely reflecting the mitigating result of its bigger domestic food production base and higher supply-chain resilience.

We continue to view price pressures as largely temporal instead of a sign of a sustained inflationary cycle. Appropriately, we expect average inflation to ease to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume slowly, we expect the US Federal Reserve to keep rates of interest on hold until December, and local rate policies to follow fit.

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 profits and FX inflows, have actually been reduced by the United States marine blockade, while non-oil activity has actually been severely struck. 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 worldwide economy after more than a decade of civil war. We prepare for GDP growth to average 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, monetary reforms, and the steady resuming of regional trade links.

Future-Proofing Regional Portfolios for 2026 Trends

The World Bank has actually slashed its 2026 growth projection for Middle East economies, stating overall GDP development in the area is expected to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the strategic 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 Poverty Outlook anticipates that the area's aggregate (omitting the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has actually been downgraded by 2.4 portion points because the January projections, showing the negative impacts of the continuous conflict.

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

Qatar: Notably, development forecast for the Qatari economy has actually seen a sharp decrease of 11.0 portion points considering that January. The economy is now expected to tape-record a contraction of 5.7%, down from an estimated development of 5.3%, due to serious obstruction to liquefied gas materials. Qatar is a crucial gamer in the global energy market, with a worldwide market share of melted gas (LNG) supplies varying in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would imply a complete shutdown of the nation's financial lifeline, instantly stopping profits inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has declined by 1.8 portion points because January.