Upcoming Middle Eastern Market Projections

Property costs have come under pressure after a duration of strong growth, with recent information from the Dubai Land Department showing a drop in home loan deals and cash sales. We think the risk of an enduring migrant outflow and an extreme slump in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has tightened up local monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor sentiment. Most GCC sovereigns bring fairly little financial obligation and financing risks are for that reason restricted in the UAE, the main bank's liquidity management has minimized immediate concerns.

That stated, Bahrain has actually been able to depend on support from neighbours, consisting of Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the area considering that the war began. High-frequency fiscal data underscore the pressure on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Key Economic Shifts in 2026

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 costs, particularly on subsidies, showing contingency expenses tied to the local environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a halt, swelling the budget deficit to the largest considering that 2017.

GCC inflation characteristics remain uneven, with food prices the primary source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively suppressed in Saudi Arabia, likely reflecting the mitigating impact of its bigger domestic food production base and greater supply-chain strength.

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

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 supply necessary revenue and FX inflows, have been curtailed by the United States marine blockade, while non-oil activity has been seriously hit. In Iraq, oil exports have collapsed to a trickle and we're forecasting 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 decade 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 progressive resuming of local trade links.

How Economic Shifts Can Shape Arabian Markets

The World Bank has slashed its 2026 development forecast for Middle East economies, stating overall GDP development 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 damage of energy and public facilities, had actually interfered with markets, increased monetary volatility, and damaged 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 Hardship Outlook anticipates that the area's aggregate (leaving out the Iran) GDP growth will decelerate 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 given that the January projections, showing the unfavorable impacts of the ongoing 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, noting that Saudi Arabia's outlook remains the greatest amongst Gulf economies. United Arab Emirates: Development forecast for the UAE has fallen by 2.7 portion points since January.

Qatar: Notably, development projection for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points given that January. The economy is now anticipated to tape-record a contraction of 5.7%, below an estimated growth of 5.3%, due to severe obstruction to melted gas materials. Qatar is a crucial gamer in the international energy market, with a global market share of melted natural gas (LNG) supplies ranging between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would indicate a total shutdown of the nation's monetary lifeline, immediately stopping earnings inflows to the state budget. Bahrain: Development projection for Bahrain's economy has declined by 1.8 percentage points given that January.