Upcoming Middle Eastern Economic Outlook

Home costs have actually come under pressure after a period of strong development, with recent information from the Dubai Land Department revealing a drop in mortgage deals and cash sales. However, we believe the risk of a lasting migrant outflow and a serious recession in the property sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. A lot of GCC sovereigns bring relatively little debt and financing dangers are for that reason limited in the UAE, the reserve bank's liquidity management has actually alleviated immediate issues.

That stated, Bahrain has actually been able to depend on support from neighbours, consisting of 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 given that the war began. High-frequency financial data underscore the pressure on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Optimizing Capital Strategies for a 2026 Economy

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 profits and a rise in costs, particularly on subsidies, showing contingency outlays tied to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the deficit spending to the biggest given that 2017.

GCC inflation dynamics 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 subdued in Saudi Arabia, likely reflecting the mitigating effect of its larger domestic food production base and higher supply-chain resilience.

We continue to see cost pressures as mostly temporal instead of a sign of a continual inflationary cycle. Appropriately, we anticipate typical inflation to alleviate to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume gradually, we expect the United States Federal Reserve to keep interest rates on hold until December, and regional rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which provide essential income and FX inflows, have been curtailed by the US naval blockade, while non-oil activity has been seriously struck. In Iraq, oil exports have collapsed to a drip 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 worldwide economy after more than a years of civil war. We prepare for GDP development to average 9.6% over 2026-2027, supported by restored financial investment, particularly in banking and energy, financial reforms, and the steady resuming of local trade links.

Future Middle Eastern Market Forecasts

The World Bank has actually slashed its 2026 growth projection for Middle East economies, stating overall GDP development in the area is anticipated 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 facilities, had actually interfered with markets, increased monetary volatility, and deteriorated 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 Poverty Outlook anticipates that the region's aggregate (leaving out the Iran) GDP development will slow down to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has been devalued by 2.4 portion points given that the January forecasts, showing the negative effects of the ongoing conflict.

Saudi Arabia: Projection was downgraded by 1.2 portion points because January. Development is now expected to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook stays the strongest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 portion points given that January.

Qatar: Significantly, growth projection for the Qatari economy has seen a sharp decline of 11.0 portion points since January. The economy is now anticipated to tape a contraction of 5.7%, below an approximated growth of 5.3%, due to serious blockage to melted gas supplies. Qatar is a key player in the worldwide energy market, with a global market share of liquefied gas (LNG) products varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Subsequently, closing the strait would indicate a complete shutdown of the country's monetary lifeline, instantly stopping earnings inflows to the state budget. Bahrain: Growth projection for Bahrain's economy has actually decreased by 1.8 portion points since January.