Essential Asset Allocation for the 2026 Market

Looking ahead, positive forecasts for a healthy IPO pipeline throughout the Gulf over the next 12-18 months appear. This optimism is buoyed by alleviating geopolitical tensions, which have formerly impacted market self-confidence. Even generally quieter markets are revealing indications of activity, exemplified by Kuwait's anticipation of a rare convenience-store IPO.

Overall, as local markets continue to develop, they reflect the more comprehensive financial and geopolitical narratives at play, presenting both difficulties and chances for investors engaging with the Middle East.

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Benefits of Investing in Emerging Markets

With new attacks, optimism that the area's stress would be dealt with in a brief amount of time faded, leaving questions about the possible long-lasting impacts of the disputes on economies. Iran's retaliation, targeting Gulf nations and strategic facilities, has a direct effect on market dynamics. Major variations occurred in the markets of Gulf nations with the increasing risk understanding, while sharp boosts stuck out in country danger premiums.

28. Taking a look at the climb in the five-year credit default swaps (CDS) of the nations in this duration, Iraq experienced the sharpest increase. The nation's threat premium increased by approximately 140 basis points to 392. Bahrain's danger premium increased by 84 basis points to 297, while Qatar's danger premium moved up by 13 basis indicate 45 in the same duration.

Saudi Arabia's danger premium visited approximately two basis indicate 80.4 in this process. Experts said Saudi Arabia experienced reasonably less impact from this scenario thanks to its strong foreign exchange revenues. Stock exchange in the Gulf followed a combined trend, while the UAE stock market became the one that fell the most given that the start of the conflicts that started with the United States and Israeli attacks on Iran and infected other countries in the area.

Shares of petrochemical and energy business in the area, following a mostly positive trend in parallel with the rise in oil costs, slowed the decrease in the indices. Selling pressure continued to be efficient in the markets in the UAE, Bahrain, Qatar, and Kuwait, where extreme airstrikes occurred. Issues about the country's security triggered a drop in realty and investment firm shares on the UAE stock exchange.

Nevertheless, airstrikes on energy centers and lines, which heightened following market closures, were not yet priced into local markets. Targeting some oil centers in the disputes and slowing down maritime traffic in the Strait of Hormuz, which has important significance for oil deliveries, increased energy expenses and fueled global inflation risks upwards.

ANSR July GCC PRs 50DR+

Evaluating the 2026 Regional Economic Outlook

The Central Bank of the UAE (CBUAE) and the Central Bank of Kuwait (CBK) revealed that their banking systems remained resilient. The CBUAE approved the "Financial Institutions Resilience Package," which is supported by the reserve bank's one trillion dirhams ($ 270 billion) asset and aims to strengthen the banking sector's stability in the face of remarkable conditions in worldwide and local markets.

The 5 primary pillars of the plan aim to increase banks' access to monetary liquidity and flexibility to support the UAE economy. Handling foreign exchange reserves exceeding one trillion dirhams ($ 270 billion) and a monetary base coverage ratio of 119%, the bank confirmed the strong basics of the UAE's 5.4 trillion dirhams ($ 1.47 trillion) banking sector.

ANSR July GCC PRs 50DR+

A statement from the Reserve bank emphasized that regional banks continued to provide all banking services efficiently and dependably, even under existing conditions. The statement said this success resulted from banks strengthening their threat management systems, establishing company continuity and emergency plans, enhancing their digital facilities, and conducting routine exercises mimicing possible circumstances in line with the Reserve bank's regulations.

Goldman Sachs, one of the major US banks, forecasted that the economies of Qatar and Kuwait could face a 14% contraction as oil deliveries would decrease in a scenario where the Strait of Hormuz stayed closed for 2 months.