Optimizing Capital Diversification in a 2026 Economy

Residential or commercial property costs have actually come under pressure after a duration of strong development, with recent data from the Dubai Land Department showing a drop in home loan transactions and cash sales. Nevertheless, we think the risk of a lasting migrant outflow and a severe decline in the property sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has tightened up local financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor sentiment. Most GCC sovereigns bring fairly little financial obligation and financing dangers are for that reason limited in the UAE, the central bank's liquidity management has reduced instant concerns.

That said, Bahrain has had the ability to depend on assistance from neighbours, consisting of Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the very first offering from the area since the war began. High-frequency fiscal information underscore the stress on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Advancing Economic Growth via Global Diversification

In Saudi Arabia, the spending plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil income and a rise in spending, particularly on aids, reflecting contingency outlays connected to the regional environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the budget deficit to the biggest considering that 2017.

GCC inflation dynamics stay uneven, with food prices the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly subdued in Saudi Arabia, most likely showing the mitigating effect of its larger domestic food production base and higher supply-chain durability.

We continue to view cost pressures as mainly transitory instead of indicative of a continual inflationary cycle. Appropriately, we anticipate typical inflation to alleviate 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 slowly, we expect the US Federal Reserve to keep rate of interest on hold 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 3 months ago). Oil production and exports, which offer essential income and FX inflows, have actually been curtailed by the United States marine blockade, while non-oil activity has been badly struck. In Iraq, oil exports have actually collapsed to a drip 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 worldwide economy after more than a decade of civil war. We prepare for GDP development to average 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, monetary reforms, and the steady resuming of regional trade links.

Future GCC Economic Outlook

The World Bank has slashed its 2026 growth forecast for Middle East economies, stating total GDP growth in the area is anticipated to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and destruction of energy and public facilities, had actually interrupted markets, increased financial volatility, and damaged 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 Poverty Outlook anticipates that the area's aggregate (leaving out the Iran) GDP growth will decrease to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has actually been downgraded by 2.4 portion points given that the January projections, showing the negative results of the continuous dispute.

Saudi Arabia: Forecast was reduced by 1.2 portion points considering that January. Development is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook remains the greatest among Gulf economies. United Arab Emirates: Development projection for the UAE has fallen by 2.7 percentage points given that January.

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

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would mean a total shutdown of the country's monetary lifeline, right away halting earnings inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 percentage points because January.