Global Capital Prospects across the GCC

Property prices have come under pressure after a period of strong growth, with current information from the Dubai Land Department showing a drop in mortgage deals and money sales. We think the danger of an enduring migrant outflow and a serious downturn in the real estate sector is low.

As an enduring US-Iran offer takes shape, the fallout from the dispute has tightened up regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor belief. A lot of GCC sovereigns carry fairly little financial obligation and financing threats are therefore limited in the UAE, the main bank's liquidity management has relieved immediate issues.

That stated, Bahrain has had the ability to rely 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 region since the war started. High-frequency financial information underscore the stress on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Driving Industrial Growth through Strategic Diversification

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 earnings and a rise in spending, particularly on aids, showing contingency investments connected to the local 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 considering that 2017.

GCC inflation dynamics stay unequal, with food costs the primary source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively subdued in Saudi Arabia, likely reflecting the mitigating effect of its bigger domestic food production base and higher supply-chain resilience.

We continue to view cost pressures as mainly transitory rather than a sign of a continual inflationary cycle. Accordingly, we expect average 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 gradually, we expect the United States Federal Reserve to keep rates of interest on hold 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 three months ago). Oil production and exports, which supply important profits and FX inflows, have been cut by the United States naval blockade, while non-oil activity has been seriously hit. In Iraq, oil exports have actually 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 worldwide economy after more than a years of civil war. We anticipate GDP development to average 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, financial reforms, and the progressive resuming of local trade links.

The Future Investment Landscape in Arabia

The World Bank has slashed its 2026 growth projection for Middle East economies, stating total GDP growth in the area is anticipated to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and destruction of energy and public infrastructure, had actually disrupted markets, increased financial volatility, and weakened the 2026 growth 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 Poverty Outlook forecasts that the area's aggregate (leaving out the Iran) GDP development will decrease to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has actually been downgraded by 2.4 portion points given that the January projections, reflecting the adverse results of the continuous conflict.

Saudi Arabia: Projection was downgraded by 1.2 percentage 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 among Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 percentage points given that January.

Qatar: Significantly, development forecast for the Qatari economy has seen a sharp decline of 11.0 percentage points since January. The economy is now expected to record a contraction of 5.7%, down from an estimated growth of 5.3%, due to severe blockage to melted gas supplies. Qatar is a crucial gamer in the international energy market, with a worldwide market share of liquefied gas (LNG) materials varying between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. As a result, closing the strait would mean a complete shutdown of the country's financial lifeline, instantly halting income inflows to the state budget. Bahrain: Growth projection for Bahrain's economy has declined by 1.8 percentage points given that January.