How Industrial Shifts Will Shape GCC Markets

Residential or commercial property rates have come under pressure after a duration of strong growth, with current information from the Dubai Land Department showing a drop in home mortgage deals and cash sales. We believe the threat of a lasting migrant outflow and an extreme slump in the genuine estate sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened up regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier belief. The majority of GCC sovereigns bring relatively little financial obligation and funding risks are therefore limited in the UAE, the reserve bank's liquidity management has actually relieved instant concerns.

That said, Bahrain has been able to rely on support from neighbours, consisting of 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 financial information highlight the strain on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Advancing Non-Oil Growth via 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 decline in oil profits and a rise in spending, particularly on aids, showing contingency expenses tied to the regional environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas profits to a stop, swelling the deficit spending to the biggest given that 2017.

GCC inflation characteristics remain uneven, with food rates the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively subdued in Saudi Arabia, likely showing the mitigating impact of its larger domestic food production base and higher supply-chain strength.

We continue to see rate pressures as mainly temporal rather than a sign of a continual inflationary cycle. Appropriately, we expect average inflation to alleviate to 2.1% y/y in 2027 as momentary 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 interest rates on hold until December, and local rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which provide important income and FX inflows, have actually been cut by the United States marine blockade, while non-oil activity has been severely hit. In Iraq, oil exports have collapsed to a trickle and we're forecasting 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 international economy after more than a years of civil war. We expect GDP development to typical 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the steady reopening of local trade links.

Top International Investment Avenues for the GCC Market

The World Bank has slashed its 2026 development forecast for Middle East economies, saying overall GDP growth in the area 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 disrupted markets, increased monetary volatility, and weakened the 2026 development 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 region's aggregate (leaving out the Iran) GDP development will slow down to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has actually been downgraded by 2.4 percentage points since the January projections, reflecting the negative effects of the continuous conflict.

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

Qatar: Notably, growth forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points considering that January. The economy is now anticipated to record a contraction of 5.7%, below an approximated development of 5.3%, due to severe blockage to liquefied gas products. Qatar is an essential gamer in the worldwide energy market, with an international market share of melted natural gas (LNG) products ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would mean a total shutdown of the nation's monetary lifeline, right away stopping revenue inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 portion points considering that January.