Navigating Investment Diversification for a 2026 Economy

Home rates have actually come under pressure after a duration of strong development, with current data from the Dubai Land Department revealing a drop in home mortgage deals and money sales. We believe the danger of a lasting migrant outflow and an extreme downturn in the real estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the dispute has tightened local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. A lot of GCC sovereigns carry fairly little debt and funding risks are for that reason restricted in the UAE, the main bank's liquidity management has minimized immediate concerns.

That said, Bahrain has actually been able to depend on support from neighbours, including Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the area because the war began. High-frequency fiscal information highlight the stress on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Strategic Economic Diversification for the Future

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 rise in spending, especially on aids, reflecting contingency investments connected to the regional environment and a velocity 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 unequal, with food prices the primary source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly suppressed in Saudi Arabia, most likely reflecting the mitigating result of its bigger domestic food production base and higher supply-chain strength.

We continue to view cost pressures as mainly transitory rather than indicative of a sustained inflationary cycle. Accordingly, we anticipate average inflation to reduce to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume slowly, we anticipate the United States Federal Reserve to keep rate of interest on hold till December, and local rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which provide essential profits and FX inflows, have been curtailed by the United States naval blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have collapsed to a trickle and we're forecasting GDP to agreement by around 22% this year, with a sharp 33% rebound in 2027 as oil exports normalise.

By contrast, Syria continues to reintegrate into the global economy after more than a decade of civil war. We prepare for GDP development to average 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, monetary reforms, and the steady reopening of local trade links.

Upcoming Middle Eastern Market Outlook

The World Bank has slashed its 2026 development projection for Middle East economies, stating total GDP growth in the area is anticipated to slow from an estimated 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 interrupted markets, increased financial 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 forecasts that the area's aggregate (excluding the Iran) GDP growth will decrease to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 projection has been devalued by 2.4 portion points since the January forecasts, reflecting the negative effects of the ongoing conflict.

Saudi Arabia: Forecast was devalued by 1.2 portion points considering that January. Growth is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the strongest among Gulf economies. United Arab Emirates: Development forecast for the UAE has actually fallen by 2.7 portion points since January.

Qatar: Especially, development forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points considering that January. The economy is now anticipated to record a contraction of 5.7%, below an approximated development of 5.3%, due to serious blockage to melted gas supplies. Qatar is a key player in the global energy market, with a global market share of melted gas (LNG) supplies varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would suggest a complete shutdown of the country's monetary lifeline, instantly halting income inflows to the state budget. Bahrain: Growth projection for Bahrain's economy has decreased by 1.8 portion points given that January.