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Home rates have come under pressure after a period of strong growth, with recent data from the Dubai Land Department showing a drop in mortgage transactions and cash sales. We believe the danger of a long lasting migrant outflow and a serious recession in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. Most GCC sovereigns carry fairly little debt and financing dangers are for that reason limited in the UAE, the reserve bank's liquidity management has actually alleviated immediate issues.

That stated, Bahrain has 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 first offering from the area because the war started. High-frequency fiscal data underscore the strain on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

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In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil earnings and a rise in spending, especially on aids, reflecting contingency outlays tied to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas profits to a stop, swelling the deficit spending to the biggest because 2017.

GCC inflation dynamics remain irregular, with food prices the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively suppressed 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 cost pressures as mainly transitory instead of a sign of a sustained inflationary cycle. Accordingly, we expect average inflation to alleviate to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume slowly, we anticipate the US Federal Reserve to keep rate of interest on hold until December, and regional rate policies to do the same.

We anticipate Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which supply necessary earnings and FX inflows, have actually been reduced by the United States marine blockade, while non-oil activity has been seriously hit. In Iraq, oil exports have 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 global economy after more than a decade of civil war. We anticipate GDP development to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, monetary reforms, and the gradual resuming of regional trade links.

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The World Bank has slashed its 2026 development forecast for Middle East economies, saying overall GDP development in the region is expected 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 interrupted markets, increased monetary volatility, and compromised the 2026 development 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 anticipates that the area's aggregate (omitting the Iran) GDP growth will slow down to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 projection has been reduced by 2.4 portion points given that the January forecasts, showing the adverse effects of the continuous dispute.

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

Qatar: Significantly, development forecast for the Qatari economy has seen a sharp decrease of 11.0 portion points because January. The economy is now anticipated to tape-record a contraction of 5.7%, down from an approximated development of 5.3%, due to severe blockage to liquefied gas supplies. Qatar is a crucial gamer in the worldwide energy market, with an international market share of melted gas (LNG) materials varying 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 total shutdown of the nation's monetary lifeline, right away stopping profits inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has actually decreased by 1.8 portion points since January.