Upcoming Regional Economic Outlook

Home prices have actually 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. We think the danger of an enduring migrant outflow and a severe slump in the real estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened up local monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor sentiment. A lot of GCC sovereigns bring fairly little financial obligation and funding risks are therefore limited in the UAE, the reserve bank's liquidity management has actually eased immediate concerns.

That stated, Bahrain has actually had the ability to rely on support 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 area given that the war began. High-frequency financial information underscore the pressure on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

Positioning Regional Portfolios for 2026 Trends

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 profits and a rise in spending, especially on subsidies, reflecting contingency investments connected to the local environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a halt, swelling the budget plan deficit to the largest considering that 2017.

GCC inflation dynamics remain uneven, with food prices the primary source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably subdued in Saudi Arabia, most likely showing the mitigating impact of its bigger domestic food production base and higher supply-chain resilience.

We continue to view rate pressures as largely transitory rather than a sign of a sustained inflationary cycle. Accordingly, we expect typical inflation to ease to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume slowly, we expect the United States Federal Reserve to keep interest rates on hold up until December, and local rate policies to follow match.

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

Optimizing Capital Diversification in a 2026 Economy

The World Bank has actually slashed its 2026 development forecast for Middle East economies, saying overall GDP growth in the region 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 destruction of energy and public infrastructure, had actually interfered with markets, increased financial volatility, and compromised 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 decrease to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has actually been reduced by 2.4 portion points given that the January projections, reflecting the unfavorable results of the ongoing conflict.

Saudi Arabia: Forecast was reduced by 1.2 portion 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 remains the greatest amongst Gulf economies. United Arab Emirates: Development projection for the UAE has actually fallen by 2.7 percentage points considering that January.

Qatar: Especially, development projection for the Qatari economy has actually seen a sharp decline of 11.0 percentage points given that January. The economy is now anticipated to tape-record a contraction of 5.7%, below an approximated growth of 5.3%, due to serious obstruction to melted gas supplies. Qatar is a crucial gamer in the global energy market, with an international market share of melted gas (LNG) supplies ranging between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would imply a total shutdown of the nation's monetary lifeline, instantly stopping income inflows to the state budget plan. Bahrain: Growth projection for Bahrain's economy has decreased by 1.8 percentage points given that January.