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Residential or commercial property rates have come under pressure after a period of strong development, with current data from the Dubai Land Department revealing a drop in mortgage transactions and money sales. Nevertheless, we believe the danger of an enduring migrant outflow and an extreme downturn in the property sector is low.

As a long lasting US-Iran offer takes shape, the fallout from the dispute has actually tightened up local monetary conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. A lot of GCC sovereigns bring relatively little financial obligation and financing risks are for that reason limited in the UAE, the reserve bank's liquidity management has actually reduced instant concerns.

That said, Bahrain has actually been able to count 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 since the war began. High-frequency financial data highlight the strain on local public finances from the dispute.

ANSR July GCC PRs 50DR+

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In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil profits and a surge in spending, especially on subsidies, showing contingency outlays tied to the local environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the deficit spending to the largest given that 2017.

GCC inflation characteristics remain unequal, with food prices the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly controlled in Saudi Arabia, likely showing the mitigating result of its larger domestic food production base and greater supply-chain resilience.

We continue to see rate pressures as largely transitory instead of a sign of a continual inflationary cycle. Accordingly, we expect average inflation to ease to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume slowly, we anticipate the United States Federal Reserve to keep rates of interest on hold till December, and regional rate policies to do the same.

We expect Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which supply vital income and FX inflows, have actually been curtailed by the US marine blockade, while non-oil activity has actually been seriously struck. 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 global economy after more than a decade of civil war. We prepare for GDP growth to average 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, monetary reforms, and the gradual resuming of regional trade links.

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The World Bank has slashed its 2026 development forecast for Middle East economies, saying general GDP growth in the area 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 disrupted markets, increased monetary volatility, and deteriorated 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 region's aggregate (omitting the Iran) GDP development will slow down to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 projection has been reduced by 2.4 portion points considering that the January projections, reflecting the unfavorable impacts of the ongoing conflict.

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

Qatar: Especially, growth projection for the Qatari economy has seen a sharp decline of 11.0 percentage points since January. The economy is now anticipated to tape a contraction of 5.7%, down from an estimated development of 5.3%, due to extreme blockage to liquefied gas supplies. Qatar is an essential player in the worldwide energy market, with an international market share of melted natural gas (LNG) supplies varying in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Subsequently, closing the strait would suggest a total shutdown of the country's monetary lifeline, right away stopping revenue inflows to the state spending plan. Bahrain: Development forecast for Bahrain's economy has declined by 1.8 percentage points given that January.