Critical Equity Capital Insights for GCC Growth

Property prices have actually come under pressure after a duration of strong development, with recent information from the Dubai Land Department showing a drop in mortgage deals and cash sales. Nevertheless, we believe 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 regional monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. Most GCC sovereigns bring relatively little debt and financing risks are therefore restricted in the UAE, the reserve bank's liquidity management has actually eased immediate issues.

That stated, Bahrain has had the ability 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 considering that the war started. High-frequency financial information underscore the strain on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Future Middle Eastern Economic Outlook

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 revenue and a surge in spending, particularly on subsidies, reflecting contingency investments connected to the regional environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the deficit spending to the largest since 2017.

GCC inflation characteristics stay unequal, 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 reasonably suppressed in Saudi Arabia, most likely reflecting the mitigating result of its larger domestic food production base and greater supply-chain strength.

We continue to see price pressures as largely transitory instead of a sign of a continual inflationary cycle. Appropriately, we anticipate typical inflation to reduce 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 expect the United States Federal Reserve to keep rates of interest on hold till December, and local rate policies to follow fit.

We anticipate Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which provide necessary revenue and FX inflows, have actually been curtailed by the US marine blockade, while non-oil activity has actually been seriously hit. 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 international economy after more than a years of civil war. We expect GDP development to typical 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, monetary reforms, and the steady reopening of regional trade links.

Middle East Equity Market Trends in 2026

The World Bank has slashed its 2026 development projection for Middle East economies, stating total GDP growth 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 destruction of energy and public facilities, had actually interfered with markets, increased financial volatility, and weakened 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 (excluding the Iran) GDP development will decrease to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has been downgraded by 2.4 portion points considering that the January forecasts, showing the adverse effects of the ongoing conflict.

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

Qatar: Especially, development forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points since January. The economy is now expected to tape a contraction of 5.7%, down from an estimated growth of 5.3%, due to severe obstruction to melted gas materials. Qatar is an essential player in the international energy market, with a worldwide market share of melted natural gas (LNG) products varying in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would imply a total shutdown of the country's financial lifeline, right away stopping revenue inflows to the state budget plan. Bahrain: Growth projection for Bahrain's economy has declined by 1.8 portion points since January.