International Investment Prospects across the Middle East

Home prices have actually come under pressure after a duration of strong growth, with recent data from the Dubai Land Department showing a drop in home loan transactions and cash sales. However, we believe the danger of a lasting migrant outflow and a serious recession in the realty sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened up local financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. The majority of GCC sovereigns carry relatively little financial obligation and financing threats are for that reason limited in the UAE, the main bank's liquidity management has actually minimized instant issues.

That stated, Bahrain has actually been able to count on support from neighbours, including 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 data underscore the strain on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Foreign Capital Prospects within the Middle East

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 profits and a rise in spending, particularly on aids, showing contingency outlays tied to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas income to a halt, swelling the budget deficit to the biggest since 2017.

GCC inflation dynamics stay unequal, with food rates the main source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably suppressed in Saudi Arabia, most likely showing the mitigating impact of its bigger domestic food production base and higher supply-chain durability.

We continue to see price pressures as mainly temporal rather than a sign of a continual inflationary cycle. Accordingly, we anticipate average inflation to alleviate 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 anticipate the United States Federal Reserve to keep interest rates on hold until December, and regional rate policies to do the same.

We expect 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 revenue and FX inflows, have actually been reduced by the US marine blockade, while non-oil activity has actually been badly struck. In Iraq, oil exports have collapsed to a trickle 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 international 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, monetary reforms, and the steady reopening of regional trade links.

GCC Stock Trading Trends in 2026

The World Bank has slashed its 2026 growth projection for Middle East economies, stating overall GDP growth in the area is anticipated to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and damage of energy and public facilities, had actually interrupted markets, increased monetary volatility, and damaged 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 Poverty Outlook forecasts that the area's aggregate (leaving out the Iran) GDP growth will slow down to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has actually been devalued by 2.4 portion points considering that the January projections, reflecting the adverse results of the ongoing dispute.

Saudi Arabia: Forecast was devalued by 1.2 percentage points because 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 greatest among Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 percentage points since January.

Qatar: Notably, development projection for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points considering that January. The economy is now anticipated to tape-record a contraction of 5.7%, below an estimated growth of 5.3%, due to severe obstruction to melted gas supplies. Qatar is a key gamer in the international energy market, with a global market share of liquefied natural gas (LNG) materials ranging in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would indicate a complete shutdown of the nation's monetary lifeline, instantly halting income inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 percentage points considering that January.