Positioning Middle East Investments for 2026 Trends

Residential or commercial property rates have come under pressure after a period of strong development, with current information from the Dubai Land Department showing a drop in mortgage deals and cash sales. We believe the danger of an enduring migrant outflow and a serious slump in the real estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the conflict has tightened up local financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker financier belief. Many GCC sovereigns bring reasonably little debt and funding dangers are therefore restricted in the UAE, the reserve bank's liquidity management has reduced immediate concerns.

That said, Bahrain has 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 first offering from the area considering that the war started. High-frequency fiscal information underscore the stress on local public finances from the conflict.

ANSR July GCC PRs 50DR+

2026 Investment Climate in the GCC

In Saudi Arabia, the budget plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil profits and a rise in spending, especially on subsidies, showing contingency expenses tied to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the budget deficit to the biggest since 2017.

GCC inflation dynamics stay irregular, with food costs the primary source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays relatively controlled in Saudi Arabia, most likely reflecting the mitigating impact of its larger domestic food production base and greater supply-chain resilience.

We continue to see cost pressures as mostly transitory instead of indicative of a sustained inflationary cycle. Appropriately, we expect typical inflation to alleviate 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 expect the United States Federal Reserve to keep rates of interest on hold until December, and regional 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 supply important income and FX inflows, have actually been curtailed by the United States marine blockade, while non-oil activity has been severely hit. In Iraq, oil exports have actually 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 worldwide economy after more than a years of civil war. We anticipate GDP development to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, monetary reforms, and the steady reopening of local trade links.

Foreign Capital Opportunities within the Middle East

The World Bank has actually slashed its 2026 growth projection for Middle East economies, saying general GDP development in the region 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 infrastructure, had actually interfered with markets, increased monetary volatility, and damaged the 2026 development 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 (excluding the Iran) GDP development will decelerate to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has been reduced by 2.4 percentage points because the January forecasts, reflecting the negative results of the ongoing conflict.

Saudi Arabia: Forecast was reduced 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 remains the greatest amongst Gulf economies. United Arab Emirates: Development forecast for the UAE has actually fallen by 2.7 percentage points considering that January.

Qatar: Significantly, development forecast for the Qatari economy has seen a sharp decrease of 11.0 percentage points considering that January. The economy is now anticipated to tape a contraction of 5.7%, down from an estimated growth of 5.3%, due to severe obstruction to liquefied gas supplies. Qatar is an essential player in the international energy market, with a global market share of melted natural gas (LNG) materials ranging between 20% and 21%.

Kuwait relies completely (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, immediately stopping earnings inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 portion points since January.