Foreign Capital Prospects across the GCC

Home rates have come under pressure after a period of strong development, with recent data from the Dubai Land Department revealing a drop in mortgage transactions and money sales. However, we believe the danger of an enduring migrant outflow and a severe recession in the real estate sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened up regional monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor sentiment. Many GCC sovereigns bring relatively little financial obligation and funding risks are for that reason limited in the UAE, the reserve bank's liquidity management has minimized immediate issues.

That said, Bahrain has had the ability to depend 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 area given that the war began. High-frequency financial data highlight the stress on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

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In Saudi Arabia, the budget deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil income and a rise in costs, especially on aids, showing contingency expenses tied 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 budget deficit to the biggest because 2017.

GCC inflation dynamics remain unequal, with food rates the main source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively suppressed in Saudi Arabia, most likely showing the mitigating result of its larger domestic food production base and greater supply-chain strength.

We continue to view rate pressures as mostly temporal rather than indicative of a continual inflationary cycle. Appropriately, we expect average inflation to reduce to 2.1% y/y in 2027 as temporary 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 rates of interest on hold up until December, and regional rate policies to follow fit.

We expect Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which supply essential revenue and FX inflows, have actually been curtailed by the United States marine blockade, while non-oil activity has actually been significantly hit. In Iraq, oil exports have collapsed to a drip 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 worldwide economy after more than a decade of civil war. We anticipate GDP growth to typical 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, monetary reforms, and the progressive reopening of regional trade links.

Key International Capital Avenues for the GCC Region

The World Bank has actually slashed its 2026 development projection for Middle East economies, stating overall GDP development in the region is expected to slow from an approximated 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 disrupted markets, increased monetary volatility, and weakened the 2026 development 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 development will decrease to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has been devalued by 2.4 percentage points since the January forecasts, showing the negative impacts of the continuous conflict.

Saudi Arabia: Forecast was reduced by 1.2 portion points since 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 remains the greatest amongst Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 percentage points given that January.

Qatar: Significantly, development forecast for the Qatari economy has seen a sharp decline of 11.0 percentage points because January. The economy is now expected to tape a contraction of 5.7%, down from an estimated development of 5.3%, due to extreme blockage to melted gas products. Qatar is a key player in the worldwide energy market, with a worldwide market share of melted gas (LNG) materials varying between 20% and 21%.

Kuwait relies entirely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. As a result, closing the strait would indicate a complete shutdown of the nation's monetary lifeline, right away stopping earnings inflows to the state budget. Bahrain: Development projection for Bahrain's economy has declined by 1.8 percentage points because January.