Foreign Capital Opportunities within the Middle East

Home prices have actually come under pressure after a period of strong development, with current data from the Dubai Land Department showing a drop in home loan deals and cash sales. Nevertheless, we think the threat of an enduring migrant outflow and a severe slump in the property sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened up local financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor belief. A lot of GCC sovereigns carry reasonably little debt and financing risks are therefore limited in the UAE, the reserve bank's liquidity management has actually relieved immediate concerns.

That said, Bahrain has actually been able 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 very first offering from the area since the war began. High-frequency financial data highlight the pressure on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Key Economic Diversification in the Future

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil revenue and a surge in costs, especially on subsidies, reflecting contingency investments tied to the regional environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the deficit spending to the biggest given that 2017.

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

We continue to view price pressures as mainly temporal rather than a sign of a continual inflationary cycle. Appropriately, we expect typical inflation to relieve to 2.1% y/y in 2027 as momentary 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 rate of interest on hold until December, and regional rate policies to follow match.

We anticipate Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which supply essential earnings and FX inflows, have actually been curtailed by the United States marine blockade, while non-oil activity has been seriously struck. In Iraq, oil exports have collapsed to a trickle 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 decade 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 local trade links.

Strategic Economic Expansion in the Future

The World Bank has actually slashed its 2026 development projection for Middle East economies, saying general GDP growth in the region 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 destruction of energy and public facilities, had interrupted markets, increased monetary volatility, and damaged 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 region's aggregate (omitting the Iran) GDP development will slow down to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has been reduced by 2.4 portion points since the January forecasts, showing the negative results of the continuous dispute.

Saudi Arabia: Projection was reduced by 1.2 portion points since 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 among Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 percentage points because January.

Qatar: Notably, development forecast for the Qatari economy has seen a sharp decrease of 11.0 percentage points considering that January. The economy is now anticipated to tape a contraction of 5.7%, down from an estimated growth of 5.3%, due to serious obstruction 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 totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would suggest a complete shutdown of the country's monetary lifeline, immediately halting profits inflows to the state budget. Bahrain: Development forecast for Bahrain's economy has declined by 1.8 portion points because January.