Top Foreign Capital Prospects in the GCC Market

Property prices have come under pressure after a period of strong development, with recent data from the Dubai Land Department showing a drop in home loan transactions and money sales. We think the danger of a lasting migrant outflow and an extreme decline in the genuine estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. A lot of GCC sovereigns carry fairly little debt and financing dangers are for that reason limited in the UAE, the reserve bank's liquidity management has alleviated instant concerns.

That stated, Bahrain has actually been able 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 very first offering from the area since the war started. High-frequency financial information highlight the pressure on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Positioning Regional Portfolios against 2026 Shifts

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

GCC inflation dynamics stay uneven, with food rates the main source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively suppressed in Saudi Arabia, most likely reflecting the mitigating impact of its bigger domestic food production base and greater supply-chain resilience.

We continue to see price pressures as mainly temporal instead of a sign of a continual inflationary cycle. Accordingly, we expect typical inflation to alleviate to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we anticipate the US Federal Reserve to keep rates of interest on hold up until December, and regional rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which offer necessary earnings and FX inflows, have been cut by the US naval blockade, while non-oil activity has been significantly struck. In Iraq, oil exports have actually collapsed to a trickle and we're anticipating 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 years of civil war. We expect GDP growth to average 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, financial reforms, and the progressive resuming of regional trade links.

Essential Economic Shifts for 2026

The World Bank has actually slashed its 2026 development projection for Middle East economies, stating total GDP development in the area 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 damage of energy and public infrastructure, had interfered with markets, increased financial 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 Hardship Outlook forecasts that the area's aggregate (omitting the Iran) GDP growth will slow down to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has been downgraded by 2.4 percentage points because the January forecasts, showing the unfavorable effects of the continuous conflict.

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

Qatar: Especially, growth projection for the Qatari economy has actually seen a sharp decrease of 11.0 portion points since January. The economy is now anticipated to tape a contraction of 5.7%, below an estimated development of 5.3%, due to extreme blockage to melted gas products. Qatar is a key player in the worldwide energy market, with a worldwide market share of liquefied gas (LNG) products varying in between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would imply a complete shutdown of the country's monetary lifeline, right away stopping earnings inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has decreased by 1.8 portion points given that January.