Advancing Non-Oil Growth via Global Diversification

Residential or commercial property prices have come under pressure after a duration of strong development, with current information from the Dubai Land Department revealing a drop in home mortgage deals and cash sales. We think the threat of a long lasting migrant outflow and a serious slump in the real estate sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor belief. A lot of GCC sovereigns bring fairly little debt and financing threats are therefore restricted in the UAE, the reserve bank's liquidity management has actually eased instant issues.

That stated, Bahrain has actually had the ability to depend 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 started. High-frequency financial data underscore the strain on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Essential Capital Expansion for 2026

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 subsidies, showing contingency investments connected to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the deficit spending to the biggest since 2017.

GCC inflation characteristics stay uneven, with food prices the primary source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably controlled in Saudi Arabia, likely showing the mitigating result of its larger domestic food production base and greater supply-chain durability.

We continue to see cost pressures as mostly temporal rather than indicative of a sustained inflationary cycle. Accordingly, we anticipate average inflation to reduce to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we anticipate the United States Federal Reserve to keep interest rates 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 forecast a 9.4% contraction three months ago). Oil production and exports, which offer important income and FX inflows, have been reduced by the United States naval blockade, while non-oil activity has actually been severely struck. In Iraq, oil exports have actually collapsed to a drip and we're forecasting 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 global economy after more than a years of civil war. We anticipate GDP development to typical 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, monetary reforms, and the progressive reopening of local trade links.

The 2026 Investment Climate in the GCC

The World Bank has actually slashed its 2026 development projection for Middle East economies, stating general GDP growth in the area 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 interfered with markets, increased monetary volatility, and damaged the 2026 development 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 region's aggregate (leaving out the Iran) GDP growth will decrease to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has been downgraded by 2.4 portion points since the January projections, reflecting the adverse results of the continuous conflict.

Saudi Arabia: Projection was devalued by 1.2 portion points since 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 remains the strongest among Gulf economies. United Arab Emirates: Growth projection for the UAE has fallen by 2.7 portion points since January.

Qatar: Notably, growth projection for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points considering that January. The economy is now expected to tape-record a contraction of 5.7%, down from an approximated development of 5.3%, due to extreme blockage to liquefied gas supplies. Qatar is an essential gamer in the international energy market, with a global market share of liquefied natural gas (LNG) materials varying between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. As a result, closing the strait would suggest a total shutdown of the country's financial lifeline, right away halting profits inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 percentage points given that January.