How Economic Shifts Will Transform GCC Markets

Residential or commercial property prices have come under pressure after a period of strong development, with current information from the Dubai Land Department revealing a drop in home loan transactions and money sales. However, we believe the risk of a long lasting migrant outflow and a serious decline in the property sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor belief. A lot of GCC sovereigns bring fairly little financial obligation and funding dangers are therefore restricted in the UAE, the central bank's liquidity management has eased immediate concerns.

That said, Bahrain has actually been able to rely on assistance from neighbours, including Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the region given that the war began. High-frequency financial information highlight the pressure on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

2026 Investment Climate of Arabia

In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil earnings and a surge in spending, especially on aids, showing contingency investments tied to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a stop, swelling the deficit spending to the largest because 2017.

GCC inflation dynamics stay irregular, with food costs the main source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively controlled in Saudi Arabia, likely reflecting the mitigating effect of its bigger domestic food production base and higher supply-chain durability.

We continue to view rate pressures as largely transitory rather than indicative of a sustained inflationary cycle. Appropriately, we expect typical 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 likely set to resume gradually, we expect the US Federal Reserve to keep rates of interest on hold till December, and regional rate policies to do the same.

We anticipate Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which provide important earnings and FX inflows, have actually been cut by the United States naval blockade, while non-oil activity has been significantly struck. 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 global economy after more than a years of civil war. We anticipate GDP development to typical 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, monetary reforms, and the gradual resuming of local trade links.

Foreign Capital Opportunities across the Middle East

The World Bank has actually slashed its 2026 development forecast for Middle East economies, stating general GDP growth in the region is expected to slow from an estimated 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 interfered with markets, increased monetary volatility, and deteriorated 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 Hardship Outlook anticipates that the region's aggregate (leaving out the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has actually been downgraded by 2.4 portion points since the January forecasts, showing the unfavorable impacts of the ongoing conflict.

Saudi Arabia: Forecast was downgraded by 1.2 portion points since January. Development is now expected 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: Development forecast for the UAE has fallen by 2.7 percentage points considering that January.

Qatar: Especially, development projection for the Qatari economy has seen a sharp decrease of 11.0 portion points since January. The economy is now expected to record a contraction of 5.7%, below an estimated growth of 5.3%, due to extreme obstruction to liquefied gas supplies. Qatar is a key player in the international energy market, with a worldwide market share of melted gas (LNG) materials ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would suggest a total shutdown of the nation's monetary lifeline, instantly stopping earnings inflows to the state budget. Bahrain: Growth projection for Bahrain's economy has actually declined by 1.8 portion points considering that January.