2026 Business Climate of the GCC

Property costs have actually come under pressure after a period of strong growth, with recent information from the Dubai Land Department revealing a drop in home mortgage transactions and cash sales. Nevertheless, we believe the threat of a long lasting migrant outflow and a serious decline in the genuine estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the dispute has tightened up local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. The majority of GCC sovereigns bring relatively little debt and funding threats are therefore limited in the UAE, the central bank's liquidity management has reduced immediate issues.

That said, Bahrain has actually been able to count 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 region given that the war began. High-frequency fiscal data highlight the stress on regional public financial resources from the conflict.

ANSR July GCC PRs 50DR+

The 2026 Investment Climate in 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 income and a rise in spending, especially on aids, reflecting contingency expenses connected to the regional environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the deficit spending to the largest because 2017.

GCC inflation characteristics stay uneven, with food rates the main source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably suppressed in Saudi Arabia, most likely showing the mitigating result of its larger domestic food production base and greater supply-chain durability.

We continue to see cost pressures as mostly transitory rather than indicative of a sustained inflationary cycle. Accordingly, we expect typical inflation to alleviate 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 rates of interest on hold up until December, and local rate policies to follow fit.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which provide important earnings and FX inflows, have been cut by the US marine blockade, while non-oil activity has been seriously struck. In Iraq, oil exports have actually collapsed to a drip 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 global economy after more than a years of civil war. We anticipate GDP development to average 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, financial reforms, and the steady resuming of regional trade links.

Foreign Investment Prospects within the Middle East

The World Bank has slashed its 2026 development forecast for Middle East economies, stating general 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 tactical Strait of Hormuz, and damage of energy and public facilities, had actually disrupted markets, increased financial volatility, and damaged 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 forecasts that the region's aggregate (excluding the Iran) GDP development will slow down to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 projection has actually been devalued by 2.4 portion points given that the January projections, reflecting the adverse impacts of the ongoing dispute.

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

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

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. As a result, closing the strait would imply a total shutdown of the country's financial lifeline, immediately halting income inflows to the state budget. Bahrain: Development forecast for Bahrain's economy has actually declined by 1.8 portion points considering that January.