Navigating Capital Diversification in a Global Economy

Property costs have come under pressure after a period of strong growth, with recent information from the Dubai Land Department showing a drop in home loan deals and money sales. Nonetheless, we believe the danger of a lasting migrant outflow and a severe decline in the realty sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the dispute has tightened up local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. Most GCC sovereigns bring relatively little financial obligation and funding dangers are for that reason restricted in the UAE, the main bank's liquidity management has actually relieved instant issues.

That said, Bahrain has been able to rely on assistance from neighbours, consisting of 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 region since the war began. High-frequency financial information underscore the strain on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Global Investment Prospects across the GCC

In Saudi Arabia, the budget plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil revenue and a rise in spending, especially on subsidies, reflecting contingency investments 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 largest given that 2017.

GCC inflation characteristics remain uneven, with food prices the primary source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably suppressed in Saudi Arabia, most likely reflecting the mitigating effect of its bigger domestic food production base and higher supply-chain strength.

We continue to view cost pressures as largely temporal instead of indicative of a continual inflationary cycle. Accordingly, we expect average inflation to relieve to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we anticipate the US Federal Reserve to keep interest rates on hold till December, and local rate policies to follow fit.

We anticipate 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 vital income and FX inflows, have actually been curtailed by the United States naval blockade, while non-oil activity has actually been severely struck. 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 renewed investment, especially in banking and energy, monetary reforms, and the gradual reopening of regional trade links.

Securing Regional Investments for 2026 Shifts

The World Bank has slashed its 2026 growth forecast for Middle East economies, saying 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 strategic Strait of Hormuz, and destruction of energy and public facilities, had actually interfered with markets, increased financial volatility, and compromised 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 Hardship Outlook anticipates that the region's aggregate (excluding the Iran) GDP development will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has been devalued by 2.4 percentage points given that the January forecasts, reflecting the adverse results of the continuous conflict.

Saudi Arabia: Forecast 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 greatest among Gulf economies. United Arab Emirates: Growth forecast for the UAE has actually fallen by 2.7 percentage points given that January.

Qatar: Significantly, development projection for the Qatari economy has actually seen a sharp decrease of 11.0 portion points since January. The economy is now expected to tape a contraction of 5.7%, below an approximated growth of 5.3%, due to serious blockage to liquefied gas materials. Qatar is an essential player in the worldwide energy market, with an international market share of melted natural gas (LNG) products ranging in between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. As a result, closing the strait would mean a total shutdown of the country's financial lifeline, right away halting earnings inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 percentage points given that January.