Analyzing Regional Investment Potential for 2026

Residential or commercial property prices have actually come under pressure after a period of strong growth, with current information from the Dubai Land Department revealing a drop in mortgage deals and cash sales. Nonetheless, we believe the threat of a long lasting migrant outflow and an extreme slump in the realty sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier belief. Most GCC sovereigns carry relatively little debt and financing dangers are therefore restricted in the UAE, the reserve bank's liquidity management has minimized immediate concerns.

That said, Bahrain has had the ability to depend on support from neighbours, including Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the very first offering from the area because the war began. High-frequency financial information underscore the pressure on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Essential Capital Expansion for the Future

In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil profits and a surge in costs, especially on subsidies, showing contingency outlays tied to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the deficit spending to the largest since 2017.

GCC inflation characteristics remain unequal, with food rates the primary source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively controlled in Saudi Arabia, most likely showing the mitigating result of its bigger domestic food production base and higher supply-chain strength.

We continue to view cost pressures as largely transitory instead of a sign of a sustained inflationary cycle. Accordingly, we expect typical inflation to reduce to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume gradually, we expect the United States Federal Reserve to keep rate of interest on hold up until December, and local rate policies to follow fit.

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 necessary earnings and FX inflows, have actually been cut by the United States marine blockade, while non-oil activity has been seriously struck. In Iraq, oil exports have actually collapsed to a trickle and we're anticipating 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 typical 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the gradual reopening of regional trade links.

GCC Stock Market Trends for 2026

The World Bank has actually slashed its 2026 development projection for Middle East economies, stating general 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 tactical Strait of Hormuz, and destruction of energy and public infrastructure, had disrupted markets, increased monetary volatility, and compromised 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 Poverty Outlook anticipates that the area's aggregate (leaving out the Iran) GDP growth will slow down to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has actually been downgraded by 2.4 portion points since the January forecasts, showing the negative impacts of the ongoing conflict.

Saudi Arabia: Projection was downgraded by 1.2 percentage points given that January. Development is now anticipated 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 forecast for the UAE has fallen by 2.7 percentage points given that January.

Qatar: Notably, growth forecast for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points since January. The economy is now anticipated to tape a contraction of 5.7%, below an approximated growth of 5.3%, due to extreme blockage to liquefied gas materials. Qatar is a key gamer in the international energy market, with a global market share of liquefied natural gas (LNG) products varying between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Consequently, closing the strait would indicate a total shutdown of the nation's monetary lifeline, immediately halting income inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 percentage points since January.