Positioning Regional Portfolios against 2026 Shifts

Property costs have come under pressure after a duration of strong growth, with recent data from the Dubai Land Department revealing a drop in home loan deals and money sales. We believe the danger of a lasting migrant outflow and a serious decline in the genuine estate sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the dispute has tightened regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. Most GCC sovereigns bring fairly little debt and financing dangers are for that reason restricted in the UAE, the main bank's liquidity management has actually alleviated instant concerns.

That stated, Bahrain has been able to rely 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 financial information highlight the stress on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Optimizing Capital Strategies for a Global Economy

In Saudi Arabia, the deficit spending 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 spending, particularly on subsidies, showing contingency expenses 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 biggest given that 2017.

GCC inflation dynamics stay irregular, 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 relatively subdued in Saudi Arabia, likely showing the mitigating effect of its bigger domestic food production base and higher supply-chain strength.

We continue to view rate pressures as mostly temporal instead of a sign of a continual inflationary cycle. Appropriately, we expect typical inflation to ease to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we anticipate the US Federal Reserve to keep rates of interest on hold up until December, and local rate policies to follow suit.

We anticipate Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which offer vital revenue 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 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 decade of civil war. We prepare for GDP growth to typical 9.6% over 2026-2027, supported by renewed financial investment, particularly in banking and energy, financial reforms, and the steady reopening of local trade links.

Strategic Industrial Expansion for the Future

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, saying 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 strategic Strait of Hormuz, and destruction of energy and public infrastructure, 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 Hardship Outlook forecasts that the area's aggregate (omitting the Iran) GDP growth will decrease to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has actually been devalued by 2.4 portion points given that the January forecasts, reflecting the adverse effects of the ongoing conflict.

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

Qatar: Especially, growth projection for the Qatari economy has actually seen a sharp decline of 11.0 percentage points because January. The economy is now expected to tape a contraction of 5.7%, below an estimated growth of 5.3%, due to serious obstruction to liquefied gas products. Qatar is a crucial player in the worldwide energy market, with a global market share of melted gas (LNG) materials varying between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would mean a complete shutdown of the nation's monetary lifeline, right away halting profits inflows to the state budget. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 portion points considering that January.