Strategic Industrial Shifts in the Future

Property costs have actually come under pressure after a period of strong development, with current data from the Dubai Land Department revealing a drop in home loan transactions and money sales. We think the risk of an enduring migrant outflow and an extreme slump in the real estate sector is low.

As an enduring US-Iran offer takes shape, the fallout from the dispute has actually tightened up regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. Many GCC sovereigns carry reasonably little financial obligation and funding risks are therefore restricted in the UAE, the main bank's liquidity management has actually reduced instant concerns.

That stated, Bahrain has actually been able to count on support 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 area given that the war started. High-frequency financial data highlight the stress on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Navigating Investment Diversification for a Global Economy

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 earnings and a rise in spending, particularly on aids, showing contingency outlays 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 largest given that 2017.

GCC inflation characteristics remain unequal, with food prices the main source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly subdued in Saudi Arabia, most likely reflecting the mitigating effect of its larger domestic food production base and greater supply-chain resilience.

We continue to see price pressures as largely transitory instead of indicative of a continual inflationary cycle. Appropriately, we expect average inflation to ease to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume slowly, we expect the US Federal Reserve to keep rate of interest on hold until December, and local rate policies to do the same.

We anticipate Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which supply vital income and FX inflows, have actually been reduced by the US naval blockade, while non-oil activity has actually been severely hit. In Iraq, oil exports have collapsed to a trickle and we're forecasting 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 years of civil war. We expect GDP growth to average 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, monetary reforms, and the gradual reopening of local trade links.

The Future Business Landscape of Arabia

The World Bank has slashed its 2026 development forecast for Middle East economies, stating total GDP development in the region is anticipated 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 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 area's aggregate (excluding the Iran) GDP growth will decrease to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has been downgraded by 2.4 portion points since the January projections, showing the negative results of the ongoing conflict.

Saudi Arabia: Forecast was downgraded by 1.2 portion points because January. Growth is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the strongest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 portion points given that January.

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

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Subsequently, closing the strait would suggest a total shutdown of the country's financial lifeline, right away stopping revenue inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has decreased by 1.8 percentage points given that January.