Driving Industrial Growth via Global Diversification

Property costs have come under pressure after a period of strong development, with recent information from the Dubai Land Department showing a drop in mortgage deals and cash sales. We believe the risk of a long lasting migrant outflow and a severe recession in the real estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the conflict has tightened up regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. Most GCC sovereigns carry fairly little financial obligation and funding threats are for that reason limited in the UAE, the reserve bank's liquidity management has minimized immediate concerns.

That stated, Bahrain has been able to rely on assistance from neighbours, including Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the very first offering from the region because the war began. High-frequency fiscal information underscore the strain on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Optimizing Investment Strategies for a Global Economy

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, especially on aids, showing contingency investments tied to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a halt, swelling the spending plan deficit to the biggest because 2017.

GCC inflation dynamics stay unequal, with food rates the main source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly controlled in Saudi Arabia, most likely reflecting the mitigating result of its larger domestic food production base and greater supply-chain durability.

We continue to view rate pressures as mostly temporal instead of a sign of a sustained inflationary cycle. Appropriately, we expect typical 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 likely set to resume gradually, we anticipate the United States Federal Reserve to keep rates of interest on hold up until December, and local rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which provide necessary profits and FX inflows, have actually been reduced by the US marine blockade, while non-oil activity has been severely hit. In Iraq, oil exports have 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 years of civil war. We prepare for GDP development to average 9.6% over 2026-2027, supported by restored financial investment, particularly in banking and energy, financial reforms, and the progressive resuming of local trade links.

2026 Business Landscape of Arabia

The World Bank has slashed its 2026 growth projection for Middle East economies, stating overall GDP development in the region is expected to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and damage of energy and public facilities, had actually interrupted markets, increased monetary 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 forecasts that the area's aggregate (omitting the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has been reduced by 2.4 portion points considering that the January forecasts, showing the unfavorable impacts of the continuous dispute.

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

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

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would imply a complete shutdown of the country's monetary lifeline, immediately stopping revenue inflows to the state budget plan. Bahrain: Growth projection for Bahrain's economy has actually declined by 1.8 percentage points considering that January.