Positioning Middle East Portfolios against 2026 Trends

Property prices have come under pressure after a period of strong growth, with current information from the Dubai Land Department revealing a drop in home loan transactions and cash sales. However, we think the threat of a lasting migrant outflow and an extreme downturn in the property sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the dispute has tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier sentiment. Most GCC sovereigns carry reasonably little financial obligation and financing dangers are for that reason restricted in the UAE, the central bank's liquidity management has reduced immediate issues.

That said, Bahrain has actually had the ability to count on support from neighbours, consisting of 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 information highlight the strain on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

International Investment Prospects within the Middle East

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 income and a rise in spending, particularly on subsidies, reflecting contingency expenses tied to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the deficit spending to the largest because 2017.

GCC inflation characteristics stay uneven, with food rates the primary source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly suppressed in Saudi Arabia, likely reflecting the mitigating effect of its bigger domestic food production base and greater supply-chain durability.

We continue to view cost pressures as largely transitory instead of a sign of a sustained inflationary cycle. Appropriately, we anticipate average inflation to relieve 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 gradually, we anticipate the US Federal Reserve to keep rate of interest on hold till December, and regional rate policies to do the same.

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 offer essential profits and FX inflows, have actually been cut by the US marine blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have actually 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 prepare for GDP growth to typical 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, financial reforms, and the gradual resuming of regional trade links.

Essential Equity Market Strategies for GCC Investors

The World Bank has slashed its 2026 development projection for Middle East economies, stating total GDP growth in the region 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 facilities, had interfered with markets, increased financial volatility, and deteriorated 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 Hardship Outlook forecasts that the area's aggregate (leaving out the Iran) GDP growth will slow down to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has been devalued by 2.4 percentage points because the January projections, showing the negative impacts of the ongoing dispute.

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

Qatar: Notably, growth forecast for the Qatari economy has seen a sharp decrease of 11.0 portion points since January. The economy is now expected to record a contraction of 5.7%, below an approximated development of 5.3%, due to severe blockage to liquefied gas products. Qatar is a crucial gamer in the worldwide energy market, with a global market share of liquefied natural gas (LNG) products ranging between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its crude oil and derivatives. As a result, closing the strait would mean a complete shutdown of the nation's financial lifeline, instantly halting income inflows to the state budget. Bahrain: Growth projection for Bahrain's economy has actually decreased by 1.8 percentage points considering that January.