Driving Industrial Success through Global Diversification

Residential or commercial property rates have come under pressure after a period of strong development, with recent information from the Dubai Land Department showing a drop in home loan deals and money sales. However, we believe the danger of an enduring migrant outflow and a severe slump in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened local monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. Most GCC sovereigns bring reasonably little debt and funding risks are therefore limited in the UAE, the central bank's liquidity management has actually alleviated immediate concerns.

That said, Bahrain has actually been able 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 region given that the war began. High-frequency financial information underscore the pressure on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Advancing Economic Growth through Strategic Diversification

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil income and a rise in costs, particularly on subsidies, reflecting contingency investments tied to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the spending plan deficit to the biggest given that 2017.

GCC inflation dynamics stay uneven, 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 subdued in Saudi Arabia, most likely showing the mitigating result of its larger domestic food production base and higher supply-chain durability.

We continue to view price pressures as mostly transitory rather than indicative of a continual inflationary cycle. Accordingly, we anticipate typical inflation to ease to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume slowly, we expect the US Federal Reserve to keep interest rates on hold till December, and local rate policies to follow match.

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 profits and FX inflows, have been curtailed by the United States naval blockade, while non-oil activity has been seriously struck. In Iraq, oil exports have actually collapsed to a drip 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 international economy after more than a decade of civil war. We prepare for GDP development to average 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, financial reforms, and the steady resuming of local trade links.

Key International Investment Prospects in the GCC Market

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, stating total GDP development in the region 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 damage of energy and public infrastructure, had interfered with markets, increased financial volatility, and weakened the 2026 development 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 growth will slow down to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 projection has been downgraded by 2.4 portion points since the January forecasts, showing the adverse results of the continuous conflict.

Saudi Arabia: Projection was devalued by 1.2 portion points given 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 among Gulf economies. United Arab Emirates: Development projection for the UAE has actually fallen by 2.7 percentage points considering that January.

Qatar: Notably, development forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points given that January. The economy is now anticipated to tape-record a contraction of 5.7%, down from an approximated growth of 5.3%, due to serious obstruction to liquefied gas supplies. Qatar is an essential gamer in the worldwide energy market, with a worldwide market share of melted gas (LNG) products varying in between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would indicate a complete shutdown of the country's monetary lifeline, right away halting earnings inflows to the state spending plan. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 portion points because January.