The Future Investment Landscape of the GCC

Property prices 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. Nonetheless, we believe the risk of an enduring migrant outflow and a severe decline in the property sector is low.

As an enduring US-Iran offer takes shape, the fallout from the dispute has actually tightened local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor belief. A lot of GCC sovereigns bring fairly little financial obligation and funding threats 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 rely on assistance from neighbours, including 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 given that the war started. High-frequency financial data underscore the pressure on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Future Regional Market Forecasts

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 profits and a surge in spending, particularly on subsidies, showing contingency investments connected to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a stop, swelling the spending plan deficit to the largest because 2017.

GCC inflation characteristics stay irregular, with food costs the main source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably subdued in Saudi Arabia, likely reflecting the mitigating impact of its bigger domestic food production base and higher supply-chain durability.

We continue to see cost pressures as mostly transitory rather than indicative of a sustained inflationary cycle. Appropriately, we anticipate average inflation to reduce to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume gradually, we expect the United States Federal Reserve to keep interest rates on hold till December, and regional rate policies to do the same.

We anticipate Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which offer necessary profits and FX inflows, have been reduced by the US marine blockade, while non-oil activity has been significantly hit. In Iraq, oil exports have actually 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 anticipate GDP development to average 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, financial reforms, and the progressive resuming of local trade links.

Accelerating Non-Oil Growth through Global Diversification

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, stating total GDP development 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 damage of energy and public infrastructure, had actually interrupted markets, increased monetary volatility, and weakened the 2026 growth 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 (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has been reduced by 2.4 percentage points considering that the January projections, showing the negative results of the ongoing conflict.

Saudi Arabia: Forecast was devalued by 1.2 portion points since January. Growth is now anticipated 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: Development projection for the UAE has actually fallen by 2.7 portion points since January.

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

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. As a result, closing the strait would imply a complete shutdown of the nation's financial lifeline, instantly stopping revenue inflows to the state budget plan. Bahrain: Growth projection for Bahrain's economy has decreased by 1.8 percentage points since January.