Key Capital Diversification for 2026

Property costs have come under pressure after a duration of strong development, with current information from the Dubai Land Department showing a drop in home loan deals and cash sales. We think the danger of a lasting migrant outflow and an extreme 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 up local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. Many GCC sovereigns bring reasonably little financial obligation and funding dangers are for that reason limited in the UAE, the reserve bank's liquidity management has alleviated immediate issues.

That said, Bahrain has actually had the ability to rely 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 first offering from the area since the war started. High-frequency fiscal information underscore the strain on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

2026 Middle Eastern Economic Outlook

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

GCC inflation dynamics stay unequal, with food rates the primary source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably controlled in Saudi Arabia, likely showing the mitigating effect of its larger domestic food production base and higher supply-chain resilience.

We continue to see price pressures as mainly transitory instead of a sign of a continual inflationary cycle. Appropriately, we anticipate average inflation to reduce to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we anticipate the United States Federal Reserve to keep rates of interest on hold up until December, and regional rate policies to do the same.

We anticipate Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which supply important revenue and FX inflows, have been curtailed by the US naval blockade, while non-oil activity has actually been significantly struck. In Iraq, oil exports have actually collapsed to a trickle 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 worldwide economy after more than a years of civil war. We anticipate GDP growth to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the steady resuming of regional trade links.

Strategic Capital Diversification for the Future

The World Bank has slashed its 2026 development forecast for Middle East economies, stating total GDP growth in the area is anticipated 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 interfered with markets, increased financial 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 forecasts that the area's aggregate (omitting 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 actually been devalued by 2.4 portion points because the January forecasts, showing the negative effects of the continuous dispute.

Saudi Arabia: Projection was downgraded by 1.2 percentage points considering that January. Development is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the strongest among Gulf economies. United Arab Emirates: Development forecast for the UAE has fallen by 2.7 portion points since January.

Qatar: Especially, growth projection for the Qatari economy has seen a sharp decrease of 11.0 portion points since January. The economy is now expected to record a contraction of 5.7%, down from an approximated development of 5.3%, due to serious obstruction to liquefied gas supplies. Qatar is a crucial player in the international energy market, with an international market share of liquefied natural gas (LNG) supplies ranging between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would suggest a complete shutdown of the country's monetary lifeline, instantly stopping income inflows to the state budget. Bahrain: Growth projection for Bahrain's economy has actually declined by 1.8 portion points given that January.