Positioning Regional Portfolios for 2026 Shifts

Residential or commercial property prices have actually come under pressure after a duration of strong growth, with recent data from the Dubai Land Department showing a drop in mortgage transactions and cash sales. We think the risk of an enduring migrant outflow and a severe recession in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the dispute has tightened local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. Many GCC sovereigns carry relatively little debt and funding threats are for that reason restricted in the UAE, the central bank's liquidity management has actually eased instant concerns.

That said, Bahrain has had the ability 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 area considering that the war started. High-frequency financial information highlight the stress on local public finances from the conflict.

ANSR July GCC PRs 50DR+

2026 Investment Landscape in Arabia

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 rise in spending, particularly on aids, showing contingency expenses tied to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas revenue to a stop, swelling the budget deficit to the largest because 2017.

GCC inflation characteristics remain irregular, with food rates the main source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably suppressed in Saudi Arabia, most likely showing the mitigating impact of its larger domestic food production base and higher supply-chain strength.

We continue to see price pressures as mainly transitory instead of a sign of a sustained inflationary cycle. Appropriately, we anticipate typical inflation to ease to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait most likely set to resume gradually, we anticipate the United States Federal Reserve to keep rate of interest on hold up until December, and regional rate policies to do the same.

We anticipate Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which offer necessary earnings and FX inflows, have actually been curtailed by the US marine blockade, while non-oil activity has actually been significantly hit. In Iraq, oil exports have collapsed to a trickle 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 international economy after more than a years of civil war. We expect GDP development to average 9.6% over 2026-2027, supported by restored investment, especially in banking and energy, monetary reforms, and the gradual reopening of local trade links.

Critical Equity Market Insights for Regional Growth

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, saying total 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 damage of energy and public facilities, had actually interfered with markets, increased financial volatility, and compromised 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 Poverty Outlook anticipates that the area'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 been devalued by 2.4 percentage points since the January forecasts, reflecting the adverse effects of the continuous conflict.

Saudi Arabia: Projection was devalued by 1.2 percentage points given that January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the strongest among Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 percentage points because January.

Qatar: Significantly, growth projection for the Qatari economy has actually seen a sharp decrease of 11.0 portion points given that 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 liquefied gas products. Qatar is a key gamer in the worldwide energy market, with an international market share of liquefied natural gas (LNG) supplies varying in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would indicate a total shutdown of the nation's monetary lifeline, immediately halting earnings inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has declined by 1.8 portion points since January.