Emerging Stock Market Patterns in 2026

Residential or commercial property prices have come under pressure after a period of strong development, with current data from the Dubai Land Department showing a drop in mortgage deals and money sales. However, we think the risk of a long lasting migrant outflow and a serious downturn in the realty sector is low.

As a lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. Many 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 minimized immediate issues.

That stated, Bahrain has actually had the ability to count 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 because the war started. High-frequency fiscal information underscore the pressure on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Advancing Industrial 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 decline in oil income and a rise in costs, particularly on aids, showing contingency expenses tied to the regional environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the deficit spending to the largest considering that 2017.

GCC inflation characteristics remain uneven, with food rates the primary source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively suppressed in Saudi Arabia, likely reflecting the mitigating impact of its bigger domestic food production base and higher supply-chain durability.

We continue to see rate pressures as mainly temporal rather than indicative of a continual inflationary cycle. Accordingly, we anticipate average inflation to relieve 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 gradually, we anticipate the United States Federal Reserve to keep rates of interest on hold up until December, and regional rate policies to do the same.

We anticipate Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which offer important profits and FX inflows, have been cut by the US naval blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have actually collapsed to a trickle and we're anticipating 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 prepare for 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 regional trade links.

Accelerating Non-Oil Growth through Strategic Diversification

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, stating overall GDP growth in the region is anticipated 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 interfered with 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 Poverty Outlook forecasts that the region's aggregate (excluding the Iran) GDP development will decelerate to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has actually been reduced by 2.4 portion points considering that the January forecasts, reflecting the negative effects of the continuous dispute.

Saudi Arabia: Projection was downgraded by 1.2 portion points given that 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 among Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 percentage points given that January.

Qatar: Especially, development projection for the Qatari economy has actually seen a sharp decline of 11.0 portion points since January. The economy is now expected to record a contraction of 5.7%, down from an estimated growth of 5.3%, due to extreme obstruction to melted gas materials. Qatar is a crucial player in the global energy market, with a worldwide market share of melted natural gas (LNG) products ranging in 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 total shutdown of the nation's monetary lifeline, right away stopping income inflows to the state spending plan. Bahrain: Growth forecast for Bahrain's economy has decreased by 1.8 portion points given that January.