Why Economic Shifts Can Transform GCC Markets

Home prices have actually come under pressure after a duration of strong growth, with recent information from the Dubai Land Department revealing a drop in home mortgage deals and money sales. Nonetheless, we believe the danger of an enduring migrant outflow and an extreme recession in the genuine estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened local financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. A lot of GCC sovereigns bring relatively little financial obligation and financing risks are for that reason limited in the UAE, the central bank's liquidity management has actually eased immediate issues.

That said, Bahrain has actually had the ability to depend 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 first offering from the area because the war began. High-frequency fiscal data highlight the stress on regional public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Strategic Industrial Shifts in the Future

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 income and a rise 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 deficit to the biggest given that 2017.

GCC inflation dynamics stay irregular, with food rates the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly suppressed in Saudi Arabia, likely reflecting the mitigating impact of its bigger domestic food production base and greater supply-chain durability.

We continue to view rate pressures as largely temporal rather than indicative of a sustained inflationary cycle. Accordingly, we expect typical inflation to ease to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we expect the US Federal Reserve to keep interest rates on hold till December, and local rate policies to do the same.

We expect Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which offer essential earnings and FX inflows, have actually been cut by the US naval blockade, while non-oil activity has actually been severely hit. In Iraq, oil exports have actually collapsed to a trickle and we're anticipating 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 international economy after more than a decade of civil war. We prepare for GDP growth to typical 9.6% over 2026-2027, supported by renewed financial investment, particularly in banking and energy, financial reforms, and the gradual reopening of local trade links.

Top Foreign Investment Avenues for the GCC Market

The World Bank has slashed its 2026 development 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 tactical Strait of Hormuz, and destruction of energy and public infrastructure, had actually disrupted markets, increased monetary volatility, and weakened the 2026 development outlook, the World Bank Group said in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.

The April 2026 World Bank's Macro Poverty Outlook forecasts that the region's aggregate (leaving out the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has been downgraded by 2.4 percentage points given that the January projections, showing the adverse effects of the ongoing dispute.

Saudi Arabia: Projection was reduced by 1.2 percentage points considering 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 greatest among Gulf economies. United Arab Emirates: Development forecast for the UAE has actually fallen by 2.7 percentage points given that January.

Qatar: Significantly, development projection for the Qatari economy has seen a sharp decline of 11.0 portion points since January. The economy is now anticipated to record a contraction of 5.7%, below an approximated development of 5.3%, due to severe obstruction to melted gas products. Qatar is a key gamer in the global energy market, with a global market share of liquefied gas (LNG) products ranging in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Subsequently, closing the strait would mean a complete shutdown of the country's monetary lifeline, right away stopping revenue inflows to the state budget plan. Bahrain: Development projection for Bahrain's economy has actually decreased by 1.8 portion points because January.