Future Regional Financial Outlook

Home prices have actually come under pressure after a duration of strong growth, with recent data from the Dubai Land Department revealing a drop in home loan transactions and money sales. We believe the threat of a lasting migrant outflow and a severe decline in the genuine estate sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the dispute has tightened regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier sentiment. Most GCC sovereigns carry relatively little financial obligation and funding dangers are therefore restricted in the UAE, the reserve bank's liquidity management has eased immediate issues.

That stated, Bahrain has been able to depend 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 first offering from the region considering that the war started. High-frequency financial data highlight the strain on regional public finances from the dispute.

ANSR July GCC PRs 50DR+

2026 Investment Landscape of Arabia

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil revenue and a surge in spending, especially on aids, reflecting contingency outlays connected to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the deficit spending to the biggest because 2017.

GCC inflation characteristics remain unequal, with food prices the primary source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly suppressed in Saudi Arabia, likely showing the mitigating effect of its bigger domestic food production base and greater supply-chain strength.

We continue to view cost pressures as largely temporal rather than a sign of a continual inflationary cycle. Appropriately, we expect typical inflation to alleviate to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume gradually, we anticipate the US Federal Reserve to keep rates of interest on hold up until December, and regional rate policies to follow suit.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which offer vital earnings and FX inflows, have actually been reduced by the US marine blockade, while non-oil activity has been seriously hit. In Iraq, oil exports have actually 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 global economy after more than a years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, financial reforms, and the progressive resuming of local trade links.

Upcoming Middle Eastern Market Outlook

The World Bank has slashed its 2026 growth projection for Middle East economies, saying total GDP development in the area is expected to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and damage of energy and public infrastructure, had actually interrupted markets, increased financial volatility, and damaged 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 forecasts that the area's aggregate (omitting the Iran) GDP growth will decrease to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has been devalued by 2.4 percentage points given that the January projections, reflecting the negative impacts of the ongoing conflict.

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

Qatar: Especially, development forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points considering that January. The economy is now expected to record a contraction of 5.7%, down from an estimated growth of 5.3%, due to serious obstruction to melted gas materials. Qatar is a key gamer in the worldwide energy market, with a worldwide market share of liquefied natural gas (LNG) materials ranging between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Subsequently, closing the strait would imply a total shutdown of the country's financial lifeline, immediately stopping profits inflows to the state budget plan. Bahrain: Growth projection for Bahrain's economy has declined by 1.8 portion points since January.