Evaluating Regional Market Potential for 2026

Property costs have actually come under pressure after a period of strong growth, with current data from the Dubai Land Department showing a drop in mortgage deals and money sales. We believe the risk of a lasting migrant outflow and a severe slump in the real estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the conflict has tightened up local monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. Most GCC sovereigns carry relatively little debt and financing dangers are for that reason limited in the UAE, the reserve bank's liquidity management has reduced instant issues.

That said, Bahrain has actually had the ability to rely on assistance 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 because the war started. High-frequency financial information underscore the pressure on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

The 2026 Investment Landscape in Arabia

In Saudi Arabia, the budget plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil earnings and a rise in spending, particularly on aids, showing contingency outlays connected to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the budget plan deficit to the largest given that 2017.

GCC inflation characteristics remain unequal, with food costs the primary source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively controlled in Saudi Arabia, most likely showing the mitigating result of its larger domestic food production base and higher supply-chain durability.

We continue to see cost pressures as mainly transitory instead of a sign of a sustained inflationary cycle. Appropriately, we expect typical inflation to ease to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume slowly, we expect the US Federal Reserve to keep rate of interest on hold till December, and local rate policies to do the same.

We expect Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which offer necessary earnings and FX inflows, have been reduced by the US marine blockade, while non-oil activity has been significantly struck. In Iraq, oil exports have actually collapsed to a trickle 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 prepare for GDP growth to typical 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, monetary reforms, and the gradual reopening of regional trade links.

The Future Investment Climate in Arabia

The World Bank has slashed its 2026 development forecast for Middle East economies, saying overall GDP growth in the region is expected to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and destruction of energy and public facilities, had actually disrupted markets, increased monetary volatility, and deteriorated 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 development will slow down to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has been downgraded by 2.4 portion points because the January projections, reflecting the unfavorable results of the ongoing conflict.

Saudi Arabia: Forecast was reduced 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 stays the strongest among Gulf economies. United Arab Emirates: Growth projection for the UAE has fallen by 2.7 portion points since January.

Qatar: Especially, development projection for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points because January. The economy is now anticipated to tape a contraction of 5.7%, down from an approximated development of 5.3%, due to serious obstruction to liquefied gas materials. Qatar is a crucial player in the international energy market, with an international market share of melted gas (LNG) supplies ranging in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would mean a total shutdown of the country's financial lifeline, instantly halting earnings inflows to the state budget. Bahrain: Development projection for Bahrain's economy has declined by 1.8 portion points considering that January.