Critical Equity Capital Strategies for Regional Growth

Home costs have actually come under pressure after a period of strong growth, with recent data from the Dubai Land Department revealing a drop in home mortgage transactions and money sales. We think the danger of an enduring migrant outflow and an extreme decline in the real estate sector is low.

As an enduring US-Iran offer takes shape, the fallout from the dispute has tightened local financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker financier sentiment. The majority of GCC sovereigns bring relatively little debt and financing risks are for that reason limited in the UAE, the central bank's liquidity management has relieved immediate issues.

That stated, Bahrain has 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 very first offering from the area given that the war began. High-frequency fiscal information highlight the stress on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Future Investment Landscape in Arabia

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 rise in spending, particularly on aids, showing contingency expenses connected to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the deficit spending to the largest because 2017.

GCC inflation dynamics remain uneven, with food prices the main source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably subdued in Saudi Arabia, most likely reflecting the mitigating effect of its bigger domestic food production base and higher supply-chain resilience.

We continue to see rate pressures as largely temporal rather than a sign of a sustained inflationary cycle. Accordingly, we anticipate average inflation to reduce to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume slowly, we anticipate the US Federal Reserve to keep rate of interest on hold up until December, and regional rate policies to do the same.

We expect Iran's GDP to diminish 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 curtailed by the United States naval blockade, while non-oil activity has actually been severely struck. In Iraq, oil exports have collapsed to a trickle and we're forecasting 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 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, financial reforms, and the progressive resuming of local trade links.

Positioning Middle East Investments for 2026 Shifts

The World Bank has slashed its 2026 growth forecast for Middle East economies, stating overall GDP development in the area is anticipated 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 weakened 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 forecasts that the area's aggregate (omitting the Iran) GDP development will decrease to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has been devalued by 2.4 portion points because the January projections, reflecting the adverse impacts of the continuous conflict.

Saudi Arabia: Forecast was reduced by 1.2 percentage points because January. Growth is now expected 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: Development forecast for the UAE has fallen by 2.7 portion points because January.

Qatar: Notably, development forecast for the Qatari economy has seen a sharp decline of 11.0 portion points given that January. The economy is now expected to tape-record a contraction of 5.7%, below an estimated growth of 5.3%, due to severe blockage to liquefied gas supplies. Qatar is a key player in the international energy market, with an international market share of melted gas (LNG) products ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. As a result, closing the strait would mean a total shutdown of the nation's monetary lifeline, instantly halting earnings inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has actually decreased by 1.8 portion points given that January.