Driving Economic Success via Strategic Diversification

Home prices have actually come under pressure after a period of strong development, with recent data from the Dubai Land Department revealing a drop in home loan transactions and money sales. We believe the danger of an enduring migrant outflow and a serious recession in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened local financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker financier belief. Most GCC sovereigns bring reasonably little debt and funding dangers are for that reason restricted in the UAE, the central bank's liquidity management has actually minimized instant issues.

That said, 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 given that the war began. High-frequency financial data underscore the stress on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Future Business Landscape of the GCC

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, especially on subsidies, showing contingency expenses tied to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a halt, swelling the deficit spending to the biggest considering that 2017.

GCC inflation dynamics remain irregular, with food rates the primary source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably suppressed in Saudi Arabia, most likely reflecting the mitigating result of its larger domestic food production base and greater supply-chain durability.

We continue to view cost pressures as mostly temporal rather than indicative of a continual inflationary cycle. Appropriately, we expect average inflation to reduce to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume gradually, we anticipate the United States Federal Reserve to keep interest rates on hold till December, and regional rate policies to follow fit.

We expect 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 curtailed by the United States marine blockade, while non-oil activity has actually been significantly struck. In Iraq, oil exports have collapsed to a drip and we're anticipating 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 average 9.6% over 2026-2027, supported by restored financial investment, particularly in banking and energy, financial reforms, and the progressive resuming of local trade links.

Future Regional Financial Projections

The World Bank has slashed its 2026 development projection for Middle East economies, saying overall 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 tactical Strait of Hormuz, and damage of energy and public infrastructure, had interrupted markets, increased monetary volatility, and damaged the 2026 development 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 (omitting the Iran) GDP growth will slow down to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 projection has been devalued by 2.4 percentage points considering that the January forecasts, showing the negative impacts of the continuous conflict.

Saudi Arabia: Projection was downgraded by 1.2 percentage points because 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 remains the strongest amongst Gulf economies. United Arab Emirates: Development forecast for the UAE has fallen by 2.7 portion points considering that January.

Qatar: Significantly, growth forecast for the Qatari economy has actually seen a sharp decline of 11.0 portion points given that January. The economy is now expected to tape a contraction of 5.7%, down from an estimated development of 5.3%, due to serious obstruction to melted gas materials. Qatar is an essential player in the global energy market, with an international market share of liquefied gas (LNG) supplies ranging between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. As a result, closing the strait would indicate a complete shutdown of the country's monetary lifeline, instantly stopping profits inflows to the state budget. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 percentage points considering that January.