International Capital Opportunities across the Middle East

Home rates have actually come under pressure after a duration of strong development, with current data from the Dubai Land Department revealing a drop in home loan deals and money sales. Nonetheless, we believe the risk of a long lasting migrant outflow and an extreme recession 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, broader bond spreads, and weaker investor sentiment. Most GCC sovereigns carry relatively little financial obligation and funding threats are therefore restricted in the UAE, the reserve bank's liquidity management has reduced immediate concerns.

That said, Bahrain has had the ability 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 very first offering from the area given that the war started. High-frequency financial data underscore the pressure on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Key Economic Expansion for 2026

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 surge in spending, particularly on aids, reflecting contingency expenses connected to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a halt, swelling the deficit spending to the largest given that 2017.

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

We continue to view price pressures as largely transitory rather than a sign of a continual inflationary cycle. Accordingly, we expect average inflation to reduce to 2.1% y/y in 2027 as temporary 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 up until December, and regional rate policies to follow match.

We expect Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which offer essential earnings and FX inflows, have been cut by the US marine blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have collapsed to a drip 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 worldwide economy after more than a years of civil war. We anticipate GDP growth to typical 9.6% over 2026-2027, supported by restored financial investment, particularly in banking and energy, monetary reforms, and the gradual resuming of regional trade links.

Advancing Non-Oil Growth via Global Diversification

The World Bank has slashed its 2026 growth forecast for Middle East economies, stating total 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 damage of energy and public infrastructure, had actually disrupted markets, increased financial volatility, and deteriorated 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 forecasts that the area's aggregate (omitting the Iran) GDP growth will decrease to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has actually been devalued by 2.4 portion points considering that the January forecasts, showing the unfavorable effects of the ongoing dispute.

Saudi Arabia: Projection was reduced by 1.2 percentage points since 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 remains the strongest among Gulf economies. United Arab Emirates: Development forecast for the UAE has fallen by 2.7 percentage points since January.

Qatar: Notably, growth forecast for the Qatari economy has seen a sharp decrease of 11.0 portion points given that January. The economy is now expected to tape-record a contraction of 5.7%, below an approximated growth of 5.3%, due to severe blockage to liquefied gas products. Qatar is a crucial player in the international energy market, with an international market share of liquefied natural gas (LNG) supplies ranging between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its crude oil and derivatives. As a result, closing the strait would suggest a total shutdown of the country's monetary lifeline, instantly halting revenue inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 percentage points because January.