Accelerating Non-Oil Growth through Global Diversification

Home prices have come under pressure after a duration of strong growth, with current data from the Dubai Land Department showing a drop in home loan transactions and money sales. We think the risk of a lasting migrant outflow and a severe slump in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened up local monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor belief. Many GCC sovereigns carry reasonably little debt and financing threats are therefore limited in the UAE, the central bank's liquidity management has actually relieved instant issues.

That said, Bahrain has been able to depend on assistance from neighbours, including Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the area given that the war started. High-frequency financial data highlight the pressure on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Key Foreign Investment Prospects for the GCC Market

In Saudi Arabia, the budget plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil income and a rise in costs, particularly on subsidies, reflecting contingency expenses connected to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the deficit spending to the biggest since 2017.

GCC inflation characteristics remain irregular, with food costs the main source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably suppressed in Saudi Arabia, likely showing the mitigating effect of its bigger domestic food production base and greater supply-chain strength.

We continue to view cost pressures as mostly transitory instead of a sign of a sustained inflationary cycle. Accordingly, we anticipate typical inflation to alleviate 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 gradually, we expect the United States Federal Reserve to keep interest rates on hold until December, and regional rate policies to do the same.

We expect 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 revenue and FX inflows, have actually been cut by the US marine blockade, while non-oil activity has been seriously hit. In Iraq, oil exports have 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 international economy after more than a years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, monetary reforms, and the steady reopening of regional trade links.

Future Regional Financial Projections

The World Bank has slashed its 2026 development projection for Middle East economies, saying total 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 damage of energy and public infrastructure, had interrupted markets, increased monetary 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 Poverty Outlook forecasts that the area's aggregate (leaving out the Iran) GDP development will decrease to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has been devalued by 2.4 portion points because the January projections, reflecting the negative impacts of the ongoing conflict.

Saudi Arabia: Projection was downgraded by 1.2 portion points considering that January. Growth is now expected 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 forecast for the UAE has fallen by 2.7 percentage points because January.

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

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Consequently, closing the strait would mean a total shutdown of the nation's monetary lifeline, instantly halting earnings inflows to the state spending plan. Bahrain: Growth projection for Bahrain's economy has actually declined by 1.8 portion points because January.