Positioning Regional Investments for 2026 Shifts

Home costs have actually come under pressure after a duration of strong development, with current information from the Dubai Land Department revealing a drop in home mortgage transactions and cash sales. However, we believe the risk of a long lasting migrant outflow and a serious recession in the realty sector is low.

As an enduring US-Iran deal takes shape, the fallout from the dispute has tightened up local financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. Many GCC sovereigns carry reasonably little financial obligation and funding dangers are therefore restricted in the UAE, the main bank's liquidity management has alleviated immediate concerns.

That stated, Bahrain has been able to depend 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 given that the war started. High-frequency financial data underscore the pressure on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Key International Investment Prospects in the GCC Region

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 income and a surge in spending, particularly on subsidies, reflecting contingency expenses tied to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a halt, swelling the spending plan deficit to the largest given that 2017.

GCC inflation dynamics remain irregular, with food prices the primary source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively suppressed in Saudi Arabia, likely showing the mitigating impact of its bigger domestic food production base and greater supply-chain strength.

We continue to see cost pressures as mainly transitory rather than indicative of a continual inflationary cycle. Accordingly, we anticipate typical inflation to ease to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume slowly, we anticipate the United States 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 3 months ago). Oil production and exports, which provide vital earnings and FX inflows, have actually been reduced by the US naval blockade, while non-oil activity has actually been severely hit. 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 global economy after more than a years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, financial reforms, and the steady resuming of local trade links.

Upcoming Middle Eastern Market Projections

The World Bank has slashed its 2026 development projection for Middle East economies, stating general GDP development in the region is expected to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and damage of energy and public facilities, had actually interfered with markets, increased monetary volatility, and compromised the 2026 growth 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 Hardship Outlook forecasts that the region's aggregate (omitting the Iran) GDP growth will slow down to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has been devalued by 2.4 percentage points because the January forecasts, reflecting the unfavorable impacts of the ongoing dispute.

Saudi Arabia: Forecast was reduced by 1.2 portion points because 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 greatest among Gulf economies. United Arab Emirates: Development forecast for the UAE has fallen by 2.7 portion points since January.

Qatar: Notably, development forecast for the Qatari economy has seen a sharp decline of 11.0 percentage points because January. The economy is now anticipated to tape-record a contraction of 5.7%, below an approximated development of 5.3%, due to severe obstruction to melted gas materials. Qatar is a key gamer in the international energy market, with a worldwide market share of liquefied natural gas (LNG) supplies ranging between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its crude oil and derivatives. Consequently, closing the strait would suggest a complete shutdown of the country's monetary lifeline, immediately stopping earnings inflows to the state budget plan. Bahrain: Development projection for Bahrain's economy has declined by 1.8 portion points considering that January.