Navigating Capital Diversification for a 2026 Economy

Property rates have actually come under pressure after a duration of strong growth, with current information from the Dubai Land Department showing a drop in home mortgage deals and cash sales. We think the risk of a long lasting migrant outflow and a severe slump in the genuine estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the conflict has actually tightened up local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. Many GCC sovereigns bring relatively little financial obligation and funding dangers are therefore limited in the UAE, the reserve bank's liquidity management has actually eased immediate issues.

That stated, Bahrain has actually been able to rely on assistance 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 region given that the war started. High-frequency financial data highlight the pressure on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Future Regional Market Outlook

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil earnings and a surge in costs, particularly on aids, showing contingency investments connected to the regional environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas profits to a stop, swelling the budget plan deficit to the biggest considering that 2017.

GCC inflation characteristics remain unequal, with food rates the main source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively controlled in Saudi Arabia, most likely reflecting the mitigating impact of its larger domestic food production base and higher supply-chain durability.

We continue to see cost pressures as largely temporal rather than a sign of a sustained inflationary cycle. Accordingly, we expect typical inflation to relieve 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 up until December, and regional rate policies to follow match.

We expect Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which supply important income and FX inflows, have actually been reduced by the United States naval 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 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, particularly in banking and energy, financial reforms, and the gradual resuming of local trade links.

Why Economic Diversification Can Shape Arabian Markets

The World Bank has slashed its 2026 development projection for Middle East economies, saying overall GDP growth in the region 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 facilities, had actually disrupted markets, increased monetary volatility, and deteriorated 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 Hardship Outlook anticipates that the region's aggregate (omitting the Iran) GDP development will decrease to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has actually been reduced by 2.4 portion points since the January forecasts, reflecting the negative impacts of the ongoing conflict.

Saudi Arabia: Forecast was devalued by 1.2 portion points since January. Growth 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: Growth projection for the UAE has fallen by 2.7 portion points given that January.

Qatar: Especially, development forecast for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points because January. The economy is now anticipated to record a contraction of 5.7%, down from an estimated development of 5.3%, due to severe obstruction to liquefied gas products. Qatar is a crucial player in the global energy market, with an international market share of melted natural gas (LNG) materials varying between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would indicate a complete shutdown of the country's monetary lifeline, right away stopping earnings inflows to the state budget. Bahrain: Development forecast for Bahrain's economy has actually declined by 1.8 portion points since January.