Future Investment Landscape of Arabia

Property costs have come under pressure after a period of strong development, with recent data from the Dubai Land Department showing a drop in mortgage deals and cash sales. We think the threat of a long lasting migrant outflow and an extreme downturn in the real estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the conflict has tightened regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. A lot of GCC sovereigns bring reasonably little debt and funding risks are for that reason limited in the UAE, the reserve bank's liquidity management has minimized instant issues.

That said, Bahrain has actually been able to rely 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 region given that the war began. High-frequency fiscal information underscore the stress on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Accelerating Non-Oil Growth through Global 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 rise in spending, particularly on subsidies, reflecting contingency investments 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 budget plan deficit to the biggest because 2017.

GCC inflation characteristics stay unequal, with food prices the main source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably controlled in Saudi Arabia, most likely showing the mitigating result of its bigger domestic food production base and greater supply-chain resilience.

We continue to see price pressures as largely transitory instead of indicative of a sustained inflationary cycle. Accordingly, we anticipate average inflation to alleviate 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 US Federal Reserve to keep rates of interest on hold until December, and regional 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 important earnings and FX inflows, have actually been reduced by the US naval blockade, while non-oil activity has been severely hit. In Iraq, oil exports have 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 global economy after more than a years of civil war. We anticipate GDP development to typical 9.6% over 2026-2027, supported by renewed financial investment, particularly in banking and energy, financial reforms, and the steady reopening of regional trade links.

Positioning Regional Investments against 2026 Trends

The World Bank has actually slashed its 2026 development forecast for Middle East economies, stating overall 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 strategic Strait of Hormuz, and damage of energy and public infrastructure, had interfered with markets, increased monetary volatility, and deteriorated the 2026 growth 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 anticipates that the area's aggregate (leaving out the Iran) GDP growth will slow down 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 because the January forecasts, reflecting the unfavorable impacts of the continuous dispute.

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

Qatar: Especially, growth forecast for the Qatari economy has seen a sharp decrease of 11.0 percentage points considering that January. The economy is now expected to tape a contraction of 5.7%, down from an approximated development of 5.3%, due to serious blockage to liquefied gas supplies. Qatar is a key gamer in the global energy market, with a worldwide market share of melted gas (LNG) products varying in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would indicate a complete shutdown of the country's monetary lifeline, instantly stopping revenue inflows to the state spending plan. Bahrain: Growth projection for Bahrain's economy has actually declined by 1.8 percentage points since January.