Positioning Middle East Investments for 2026 Trends

Residential or commercial property costs have actually come under pressure after a period of strong growth, with current information from the Dubai Land Department revealing a drop in home mortgage deals and money sales. We think the risk of a lasting migrant outflow and a serious slump in the real estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened local monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. The majority of GCC sovereigns carry relatively little financial obligation and funding dangers are for that reason limited in the UAE, the main bank's liquidity management has actually reduced immediate concerns.

That stated, Bahrain has actually had the ability to depend on support 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 area since the war started. High-frequency financial information underscore the strain on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Accelerating Non-Oil 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 decrease in oil profits and a surge in spending, particularly on subsidies, showing contingency outlays connected to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas income to a stop, swelling the deficit spending to the largest since 2017.

GCC inflation characteristics stay unequal, with food prices the main source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably subdued in Saudi Arabia, likely reflecting the mitigating effect of its bigger domestic food production base and higher supply-chain resilience.

We continue to see cost pressures as mostly temporal rather than a sign of a continual inflationary cycle. Accordingly, we expect average inflation to reduce to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we anticipate the US Federal Reserve to keep rate of interest on hold up until December, and local rate policies to do the same.

We anticipate 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 vital profits and FX inflows, have been reduced by the United States naval blockade, while non-oil activity has been severely struck. In Iraq, oil exports have actually collapsed to a trickle and we're forecasting GDP to agreement by around 22% this year, with a sharp 33% rebound in 2027 as oil exports normalise.

By contrast, Syria continues to reintegrate into the worldwide economy after more than a years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the progressive resuming of regional trade links.

Essential Industrial Shifts for the Future

The World Bank has slashed its 2026 development forecast for Middle East economies, stating overall GDP growth 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 actually interrupted markets, increased financial volatility, and weakened 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 forecasts that the area's aggregate (leaving out the Iran) GDP growth will slow down to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has actually been downgraded by 2.4 percentage points because the January projections, showing the unfavorable effects of the ongoing dispute.

Saudi Arabia: Forecast was downgraded 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 stays the greatest among Gulf economies. United Arab Emirates: Growth projection for the UAE has fallen by 2.7 portion points considering that January.

Qatar: Especially, 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 tape a contraction of 5.7%, down from an approximated development of 5.3%, due to serious blockage to liquefied gas products. Qatar is an essential player in the global energy market, with an international market share of liquefied natural gas (LNG) products varying between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Consequently, closing the strait would suggest a complete shutdown of the country's monetary lifeline, right away halting profits inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 portion points considering that January.