Accelerating Non-Oil Growth via Strategic Diversification

Residential or commercial property costs have come under pressure after a period of strong growth, with recent information from the Dubai Land Department revealing a drop in mortgage deals and cash sales. Nevertheless, we think the danger of an enduring migrant outflow and a serious recession in the property sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened up regional financial conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor belief. Many GCC sovereigns carry reasonably little debt and financing threats are therefore restricted in the UAE, the reserve bank's liquidity management has actually alleviated immediate concerns.

That stated, Bahrain has actually been able to count 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 very first offering from the region considering that the war began. High-frequency financial information highlight the stress on regional public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Analyzing Regional Investment Potential in 2026

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 income and a surge in costs, especially on aids, reflecting contingency outlays tied to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the deficit spending to the biggest since 2017.

GCC inflation dynamics stay irregular, with food rates 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 reflecting the mitigating effect of its bigger domestic food production base and higher supply-chain durability.

We continue to view rate pressures as mostly transitory rather than indicative of a continual inflationary cycle. Appropriately, we expect average inflation to reduce to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we expect the US Federal Reserve to keep interest rates on hold up until 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 necessary profits and FX inflows, have actually been cut by the US marine blockade, while non-oil activity has actually been significantly struck. In Iraq, oil exports have collapsed to a trickle and we're anticipating 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 financial investment, particularly in banking and energy, monetary reforms, and the gradual reopening of local trade links.

Middle East Stock Trading Trends for 2026

The World Bank has actually slashed its 2026 development projection 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 tactical Strait of Hormuz, and destruction of energy and public infrastructure, had interrupted markets, increased financial volatility, and compromised 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 anticipates that the region's aggregate (excluding the Iran) GDP development will slow down to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has actually been downgraded by 2.4 portion points since the January forecasts, reflecting the unfavorable results of the ongoing conflict.

Saudi Arabia: Projection was downgraded by 1.2 portion points because 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 greatest among Gulf economies. United Arab Emirates: Growth forecast for the UAE has actually fallen by 2.7 percentage points because January.

Qatar: Especially, development projection for the Qatari economy has seen a sharp decline of 11.0 portion points since January. The economy is now expected to tape-record a contraction of 5.7%, down from an approximated growth of 5.3%, due to extreme blockage to liquefied gas materials. Qatar is a key player in the worldwide energy market, with a worldwide market share of melted gas (LNG) supplies ranging between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would mean a complete shutdown of the country's financial lifeline, instantly halting profits inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has actually decreased by 1.8 portion points because January.