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Residential or commercial property rates have actually come under pressure after a duration of strong development, with recent data from the Dubai Land Department revealing a drop in mortgage deals and cash sales. Nevertheless, we believe the danger of a long lasting migrant outflow and an extreme recession in the property 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, broader bond spreads, and weaker financier sentiment. Many GCC sovereigns bring reasonably little debt and funding risks are for that reason limited in the UAE, the reserve bank's liquidity management has reduced instant issues.

That stated, Bahrain has actually had the ability 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 area since the war began. High-frequency financial data highlight the stress on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

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In Saudi Arabia, the spending plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil revenue and a surge in costs, particularly on subsidies, reflecting contingency investments connected to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a stop, swelling the deficit spending to the largest because 2017.

GCC inflation dynamics remain unequal, with food rates the main source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably suppressed in Saudi Arabia, most likely reflecting the mitigating effect of its bigger domestic food production base and higher supply-chain strength.

We continue to view rate pressures as largely temporal rather than indicative of a continual inflationary cycle. Accordingly, we anticipate 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 most 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 follow fit.

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 supply vital earnings and FX inflows, have actually been curtailed by the US naval blockade, while non-oil activity has been severely hit. In Iraq, oil exports have collapsed to a drip 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 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, monetary reforms, and the steady reopening of regional trade links.

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The World Bank has slashed its 2026 growth forecast for Middle East economies, stating total GDP development in the region is expected to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and destruction of energy and public facilities, had disrupted 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 region's aggregate (excluding the Iran) GDP development will slow down to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has been devalued by 2.4 portion points because the January projections, reflecting the unfavorable impacts of the continuous dispute.

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

Qatar: Notably, growth forecast for the Qatari economy has seen a sharp decrease of 11.0 percentage points given that January. The economy is now expected to record a contraction of 5.7%, below an approximated development of 5.3%, due to extreme obstruction to liquefied gas materials. Qatar is an essential gamer in the global energy market, with an international market share of liquefied gas (LNG) materials 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 complete shutdown of the country's monetary lifeline, instantly stopping earnings inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has declined by 1.8 portion points given that January.