Future Investment Landscape in Arabia

Residential or commercial property prices have actually come under pressure after a period of strong growth, with recent information from the Dubai Land Department showing a drop in home loan deals and cash sales. We believe the threat of a long lasting migrant outflow and a serious recession in the genuine estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the dispute has tightened up local monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier sentiment. A lot of GCC sovereigns carry reasonably little financial obligation and financing threats are therefore restricted in the UAE, the main bank's liquidity management has actually eased instant issues.

That said, Bahrain has actually been able to count on assistance 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 region because the war started. High-frequency financial information underscore the stress on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Accelerating Industrial Success through Strategic Diversification

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 surge in costs, particularly on aids, reflecting contingency expenses tied to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the deficit spending to the biggest considering that 2017.

GCC inflation dynamics stay 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 stays fairly subdued in Saudi Arabia, likely reflecting the mitigating result of its bigger domestic food production base and greater supply-chain strength.

We continue to see price pressures as mostly transitory rather than a sign of a continual inflationary cycle. Appropriately, we expect 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 gradually, we expect the United States Federal Reserve to keep rate of interest on hold until December, and local rate policies to follow suit.

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 provide important income and FX inflows, have been curtailed by the United States marine blockade, while non-oil activity has actually been seriously struck. In Iraq, oil exports have collapsed to a drip 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 international economy after more than a years of civil war. We anticipate GDP development to average 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, financial reforms, and the gradual reopening of regional trade links.

Evaluating Regional Market Potential for 2026

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, saying general 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 destruction of energy and public infrastructure, had interrupted markets, increased monetary volatility, and compromised 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 region's aggregate (omitting the Iran) GDP growth will decrease to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has been downgraded by 2.4 percentage points since the January projections, showing the unfavorable effects of the ongoing conflict.

Saudi Arabia: Forecast was reduced by 1.2 percentage points given that 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 strongest among Gulf economies. United Arab Emirates: Development projection for the UAE has actually fallen by 2.7 percentage points since January.

Qatar: Significantly, development projection for the Qatari economy has actually seen a sharp decrease of 11.0 portion points considering that January. The economy is now anticipated to record a contraction of 5.7%, down from an estimated development of 5.3%, due to serious blockage to liquefied gas materials. Qatar is a crucial player in the worldwide energy market, with a global market share of liquefied natural gas (LNG) materials ranging in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would indicate a complete shutdown of the nation's financial lifeline, right away stopping profits inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 percentage points considering that January.