Positioning Middle East Portfolios against 2026 Shifts

Home prices have come under pressure after a period of strong growth, with recent information from the Dubai Land Department revealing a drop in mortgage deals and cash sales. We believe the risk of a lasting migrant outflow and a serious decline in the real estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the dispute has tightened regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. Many GCC sovereigns carry reasonably little debt and funding threats are for that reason limited in the UAE, the central bank's liquidity management has actually alleviated immediate issues.

That stated, Bahrain has been able to count on support from neighbours, consisting of 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 considering that the war started. High-frequency fiscal data underscore the strain on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Analyzing Regional Investment Resilience for 2026

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 earnings and a surge in spending, particularly on aids, reflecting contingency investments tied to the regional environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas income to a halt, swelling the deficit spending to the largest considering that 2017.

GCC inflation dynamics remain unequal, with food prices the main source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably subdued in Saudi Arabia, most likely reflecting the mitigating result of its larger domestic food production base and greater supply-chain resilience.

We continue to view rate pressures as mainly transitory instead of indicative of a sustained inflationary cycle. Accordingly, we expect average inflation to relieve to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we anticipate the US Federal Reserve to keep rates of interest on hold till December, and local rate policies to follow match.

We anticipate Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which supply important earnings and FX inflows, have been reduced by the United States naval blockade, while non-oil activity has been seriously hit. In Iraq, oil exports have collapsed to a drip and we're forecasting 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 years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by renewed financial investment, particularly in banking and energy, financial reforms, and the steady resuming of regional trade links.

Upcoming GCC Economic Outlook

The World Bank has actually slashed its 2026 development forecast for Middle East economies, stating 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 damage of energy and public facilities, had disrupted markets, increased financial volatility, and deteriorated the 2026 growth 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 anticipates that the area's aggregate (leaving out the Iran) GDP development will slow down to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has been downgraded by 2.4 percentage points given that the January projections, showing the unfavorable effects of the ongoing dispute.

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

Qatar: Notably, growth projection for the Qatari economy has seen a sharp decline of 11.0 portion points given that January. The economy is now anticipated to tape-record a contraction of 5.7%, below an estimated development of 5.3%, due to severe obstruction to melted gas products. Qatar is a crucial player in the international energy market, with a global market share of melted natural gas (LNG) products varying in between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would mean a complete shutdown of the nation's monetary lifeline, right away halting profits inflows to the state spending plan. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 percentage points considering that January.