International Investment Prospects across the Middle East

Home prices have actually come under pressure after a duration of strong development, with current data from the Dubai Land Department showing a drop in home loan transactions and cash sales. Nevertheless, we think the risk of a lasting migrant outflow and a serious decline in the realty sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened up local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. A lot of GCC sovereigns carry reasonably little debt and funding dangers are for that reason limited in the UAE, the central bank's liquidity management has actually eased instant concerns.

That said, Bahrain has actually been able to count on support from neighbours, including Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the region considering that the war started. High-frequency financial data underscore the pressure on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Future Business Landscape of Arabia

In Saudi Arabia, the spending plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil income and a surge in spending, especially on subsidies, reflecting contingency expenses connected to the local environment and a velocity of Vision 2030 spending. 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 stay irregular, with food costs the main source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly controlled in Saudi Arabia, likely showing the mitigating result of its larger domestic food production base and higher supply-chain durability.

We continue to view rate pressures as mainly temporal instead of a sign of a sustained inflationary cycle. Accordingly, we expect typical inflation to reduce to 2.1% y/y in 2027 as short-lived 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 up until December, and local rate policies to follow match.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which supply important profits and FX inflows, have actually been cut by the US marine blockade, while non-oil activity has been badly struck. In Iraq, oil exports have actually collapsed to a trickle 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 international economy after more than a years of civil war. We prepare for GDP growth to average 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, financial reforms, and the gradual reopening of regional trade links.

Navigating Capital Diversification in a Global Economy

The World Bank has slashed its 2026 growth forecast for Middle East economies, stating general GDP growth in the area 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 damage of energy and public infrastructure, had interfered with 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 Hardship Outlook forecasts that the region's aggregate (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has actually been reduced by 2.4 portion points because the January forecasts, reflecting the unfavorable effects of the ongoing dispute.

Saudi Arabia: Forecast was reduced 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 greatest amongst Gulf economies. United Arab Emirates: Development forecast for the UAE has actually fallen by 2.7 percentage points because January.

Qatar: Notably, growth projection for the Qatari economy has actually seen a sharp decrease of 11.0 portion points because January. The economy is now expected 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 an essential gamer in the global energy market, with a worldwide market share of liquefied natural gas (LNG) products varying in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Subsequently, closing the strait would suggest a complete shutdown of the nation's financial lifeline, right away stopping profits inflows to the state spending plan. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 percentage points because January.