Essential Capital Expansion for 2026

Home rates have actually come under pressure after a duration of strong growth, with current information from the Dubai Land Department revealing a drop in mortgage transactions and cash sales. We think the threat of a lasting migrant outflow and a severe slump in the genuine estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the dispute has tightened up regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor belief. Most GCC sovereigns bring reasonably little financial obligation and funding dangers are for that reason limited in the UAE, the reserve bank's liquidity management has actually minimized immediate issues.

That said, Bahrain has actually been able to rely on support from neighbours, consisting of Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the very first offering from the region since the war started. High-frequency fiscal information underscore the pressure on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Advancing Economic Growth via Global Diversification

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 earnings and a surge in costs, particularly on aids, reflecting contingency investments connected to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a stop, swelling the deficit spending 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 strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably suppressed in Saudi Arabia, most likely showing the mitigating effect of its bigger domestic food production base and greater supply-chain resilience.

We continue to view price pressures as mainly temporal rather than indicative of a continual inflationary cycle. Accordingly, we anticipate average inflation to ease 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 expect the United States Federal Reserve to keep rate of interest 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 three months ago). Oil production and exports, which supply important revenue and FX inflows, have actually been reduced by the US naval blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have collapsed to a trickle 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 decade of civil war. We anticipate GDP development to typical 9.6% over 2026-2027, supported by restored financial investment, particularly in banking and energy, monetary reforms, and the gradual reopening of regional trade links.

How Industrial Diversification Can Shape Arabian Markets

The World Bank has actually slashed its 2026 development projection for Middle East economies, stating total GDP development 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 facilities, had actually disrupted markets, increased financial volatility, and deteriorated 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 area'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 projection has been reduced by 2.4 portion points since the January projections, showing the negative results of the ongoing conflict.

Saudi Arabia: Projection was downgraded by 1.2 percentage points given that 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 stays the strongest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 portion points considering that January.

Qatar: Especially, growth forecast for the Qatari economy has seen a sharp decline of 11.0 percentage points given that January. The economy is now anticipated to record a contraction of 5.7%, down from an approximated development of 5.3%, due to extreme blockage to melted gas supplies. Qatar is a crucial gamer in the international energy market, with an international market share of liquefied natural gas (LNG) products ranging between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would indicate a complete shutdown of the country's monetary lifeline, immediately stopping revenue inflows to the state budget. Bahrain: Development forecast for Bahrain's economy has actually decreased by 1.8 portion points because January.