Why Economic Shifts Will Shape GCC Markets

Home costs have actually come under pressure after a duration of strong growth, with recent information from the Dubai Land Department revealing a drop in mortgage transactions and cash sales. We think the threat of a lasting migrant outflow and a serious decline in the real estate sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, larger 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 concerns.

That stated, Bahrain has been able to rely on support 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 given that the war started. High-frequency fiscal data highlight the pressure on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Key Stock Market Insights for GCC Investors

In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil earnings and a rise in spending, particularly on subsidies, showing 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 largest given that 2017.

GCC inflation dynamics stay uneven, with food costs the main source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably subdued in Saudi Arabia, most likely showing the mitigating effect of its bigger domestic food production base and greater supply-chain resilience.

We continue to see rate pressures as largely temporal rather than indicative of a continual inflationary cycle. Appropriately, we anticipate typical inflation to reduce to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume gradually, we anticipate the United States Federal Reserve to keep rate of interest on hold up until December, and regional rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which supply vital profits and FX inflows, have been cut by the United States naval blockade, while non-oil activity has been severely struck. In Iraq, oil exports have actually collapsed to a drip 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 international 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, monetary reforms, and the gradual resuming of local trade links.

International Capital Opportunities within the GCC

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, saying general GDP development in the area is anticipated 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 weakened 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 anticipates that the area's aggregate (excluding the Iran) GDP growth will decrease to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has been reduced by 2.4 percentage points considering that the January forecasts, reflecting the adverse impacts of the continuous conflict.

Saudi Arabia: Forecast was devalued by 1.2 portion points since January. Growth is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the strongest amongst Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 percentage points because January.

Qatar: Significantly, development forecast for the Qatari economy has actually seen a sharp decrease of 11.0 portion points since January. The economy is now anticipated to tape-record a contraction of 5.7%, down from an estimated development of 5.3%, due to extreme obstruction to melted gas materials. Qatar is a crucial gamer in the global energy market, with a global market share of melted natural gas (LNG) products ranging in between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Consequently, closing the strait would indicate a total shutdown of the nation's financial lifeline, right away stopping revenue inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has decreased by 1.8 portion points given that January.