Essential Capital Diversification in the Future

Home prices have 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. Nevertheless, we believe the risk of a long lasting migrant outflow and a serious downturn in the property sector is low.

As a lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened regional monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor belief. Many GCC sovereigns bring reasonably little financial obligation and financing threats are therefore limited in the UAE, the reserve bank's liquidity management has actually reduced instant issues.

That said, Bahrain has had the ability to count on assistance 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 region because the war began. High-frequency fiscal information highlight the pressure on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

International Capital Opportunities within the Middle East

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, especially on aids, reflecting contingency expenses tied to the local environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a stop, swelling the deficit spending to the biggest since 2017.

GCC inflation characteristics remain irregular, with food costs the main source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably suppressed in Saudi Arabia, likely reflecting the mitigating impact of its bigger domestic food production base and greater supply-chain resilience.

We continue to view price pressures as mainly temporal instead of a sign of a continual inflationary cycle. Appropriately, we anticipate average inflation to relieve 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 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 necessary earnings and FX inflows, have been cut by the US naval blockade, while non-oil activity has actually been seriously struck. In Iraq, oil exports have 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 worldwide economy after more than a years of civil war. We prepare for GDP growth to average 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, monetary reforms, and the steady resuming of regional trade links.

Driving Industrial Success through Global Diversification

The World Bank has slashed its 2026 development 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 tactical Strait of Hormuz, and damage of energy and public facilities, had actually disrupted markets, increased financial volatility, and compromised 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 Poverty Outlook forecasts that the area's aggregate (excluding the Iran) GDP development will slow down to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has been reduced by 2.4 portion points considering that the January projections, reflecting the negative effects of the continuous conflict.

Saudi Arabia: Projection was downgraded by 1.2 percentage 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 remains the strongest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has fallen by 2.7 percentage points considering that January.

Qatar: Significantly, growth forecast for the Qatari economy has actually seen a sharp decline of 11.0 portion points considering that January. The economy is now anticipated to tape a contraction of 5.7%, below an approximated development of 5.3%, due to severe blockage to melted gas materials. Qatar is an essential player in the international energy market, with an international market share of melted gas (LNG) supplies varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Subsequently, closing the strait would imply a complete shutdown of the nation's monetary lifeline, instantly halting revenue inflows to the state budget plan. Bahrain: Growth projection for Bahrain's economy has actually decreased by 1.8 portion points considering that January.