Evaluating GCC Market Potential in 2026

Home prices have actually come under pressure after a period of strong growth, with current information from the Dubai Land Department revealing a drop in home mortgage deals and money sales. Nevertheless, we believe the threat of an enduring migrant outflow and an extreme slump in the property sector is low.

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

That said, Bahrain has actually had the ability to rely 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 region considering that the war began. High-frequency fiscal data underscore the pressure on regional public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Advancing Economic Growth 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 decrease in oil income and a rise in costs, especially on subsidies, reflecting contingency outlays tied 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 biggest because 2017.

GCC inflation dynamics remain unequal, with food costs the main source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly 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 transitory instead of indicative of a continual inflationary cycle. Appropriately, we expect typical inflation to reduce to 2.1% y/y in 2027 as temporary 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 till December, and local rate policies to do the same.

We anticipate Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which offer necessary revenue and FX inflows, have actually been reduced by the US marine 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 decade of civil war. We anticipate GDP growth to typical 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, monetary reforms, and the gradual resuming of local trade links.

Key Equity Market Strategies for Regional Investors

The World Bank has slashed its 2026 growth projection for Middle East economies, stating total GDP growth in the region is expected 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 interrupted markets, increased monetary volatility, and deteriorated 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 Hardship Outlook forecasts that the region's aggregate (excluding the Iran) GDP development will slow down to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has been reduced by 2.4 portion points given that the January forecasts, reflecting the negative impacts of the ongoing conflict.

Saudi Arabia: Projection was reduced by 1.2 percentage points given that January. Development is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting 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 portion points given that January.

Qatar: Especially, development forecast 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%, below an approximated development of 5.3%, due to serious obstruction to liquefied gas supplies. Qatar is an essential player in the global energy market, with a worldwide market share of liquefied natural gas (LNG) supplies ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would imply a complete shutdown of the nation's financial lifeline, instantly halting profits inflows to the state spending plan. Bahrain: Growth projection for Bahrain's economy has actually declined by 1.8 percentage points since January.