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Residential or commercial property rates have come under pressure after a duration of strong development, with current data from the Dubai Land Department showing a drop in home loan deals and money sales. We think the threat of a lasting migrant outflow and a severe recession in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened up local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. A lot of GCC sovereigns bring relatively little financial obligation and financing risks are for that reason restricted in the UAE, the central bank's liquidity management has eased instant concerns.

That stated, Bahrain has actually been able to depend 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 area given that the war started. High-frequency financial data highlight the strain on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

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In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil income and a surge in costs, especially on aids, reflecting contingency outlays tied to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a stop, swelling the budget deficit to the largest given that 2017.

GCC inflation dynamics stay unequal, with food costs the primary source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably controlled in Saudi Arabia, most likely reflecting the mitigating result of its bigger domestic food production base and greater supply-chain durability.

We continue to see cost pressures as largely transitory rather than a sign of a sustained inflationary cycle. Accordingly, we expect typical inflation to ease 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 anticipate the United States Federal Reserve to keep rate of interest on hold till December, and local rate policies to follow suit.

We anticipate Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which provide vital income and FX inflows, have actually been reduced by the United States marine blockade, while non-oil activity has actually been badly struck. In Iraq, oil exports have collapsed to a trickle 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 worldwide economy after more than a decade of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, financial reforms, and the steady resuming of regional trade links.

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The World Bank has actually slashed its 2026 growth forecast for Middle East economies, stating general 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 infrastructure, had actually interrupted markets, increased financial 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 area's aggregate (omitting the Iran) GDP growth will slow down to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has actually been reduced by 2.4 percentage points since the January forecasts, showing the negative impacts of the continuous conflict.

Saudi Arabia: Forecast was reduced by 1.2 portion points given that 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 stays the strongest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 portion points given that January.

Qatar: Especially, growth projection for the Qatari economy has seen a sharp decrease of 11.0 portion points since January. The economy is now anticipated to tape a contraction of 5.7%, down from an estimated development of 5.3%, due to severe obstruction to liquefied gas materials. Qatar is a key player in the global energy market, with a worldwide market share of melted gas (LNG) materials ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Subsequently, closing the strait would suggest a total shutdown of the country's monetary lifeline, instantly halting income inflows to the state budget plan. Bahrain: Growth projection for Bahrain's economy has actually decreased by 1.8 portion points since January.