Critical Equity Market Insights for Regional Growth

Home rates have come under pressure after a period of strong development, with recent information from the Dubai Land Department revealing a drop in home mortgage deals and cash sales. We think the threat of a lasting migrant outflow and an extreme decline in the real estate sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the conflict has tightened up local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier belief. A lot of GCC sovereigns carry reasonably little debt and funding threats are therefore limited in the UAE, the reserve bank's liquidity management has minimized instant concerns.

That said, Bahrain has had the ability to rely on assistance 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 region considering that the war began. High-frequency fiscal data underscore the pressure on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Why Industrial Shifts Can Shape GCC Markets

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 profits and a surge in costs, particularly on subsidies, reflecting contingency expenses tied to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the spending plan deficit to the biggest since 2017.

GCC inflation dynamics stay unequal, with food costs the main source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively controlled in Saudi Arabia, likely showing the mitigating effect of its larger domestic food production base and higher supply-chain resilience.

We continue to see rate pressures as mostly transitory rather than indicative of a sustained inflationary cycle. Appropriately, we anticipate typical inflation to reduce to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we anticipate the United States Federal Reserve to keep rates of interest on hold until December, and regional rate policies to follow match.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which offer necessary earnings and FX inflows, have actually been cut by the US naval blockade, while non-oil activity has actually been severely struck. In Iraq, oil exports have actually 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 international economy after more than a decade of civil war. We anticipate GDP growth to typical 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, monetary reforms, and the steady reopening of local trade links.

2026 Investment Landscape in Arabia

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, saying general GDP development in the area 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 destruction of energy and public infrastructure, had interfered with 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 growth will decelerate to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has actually been devalued by 2.4 percentage points since the January projections, reflecting the unfavorable impacts of the continuous conflict.

Saudi Arabia: Projection was devalued by 1.2 percentage points considering 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 remains the greatest among Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 percentage points given that January.

Qatar: Notably, development forecast for the Qatari economy has seen a sharp decrease of 11.0 percentage points because January. The economy is now expected to record a contraction of 5.7%, down from an estimated growth of 5.3%, due to extreme blockage to melted gas materials. Qatar is an essential gamer in the global energy market, with an international market share of liquefied natural gas (LNG) supplies ranging in between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its crude oil and derivatives. As a result, closing the strait would mean a total shutdown of the nation's monetary lifeline, instantly stopping profits inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 portion points given that January.