Future-Proofing GCC Portfolios for 2026 Shifts

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 home mortgage deals and money sales. Nonetheless, we believe the danger of an enduring migrant outflow and a severe downturn in the realty sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has tightened regional financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. A lot of GCC sovereigns carry fairly little debt and financing threats are therefore limited in the UAE, the reserve bank's liquidity management has relieved immediate issues.

That said, Bahrain has actually been able to rely on assistance from neighbours, including 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 region considering that the war began. High-frequency fiscal data underscore the strain on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Key Industrial Shifts for 2026

In Saudi Arabia, the budget deficit 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 costs, especially on subsidies, showing contingency outlays tied to the local environment and a velocity of Vision 2030 spending. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the deficit spending to the biggest because 2017.

GCC inflation characteristics remain uneven, with food costs the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably subdued in Saudi Arabia, likely showing the mitigating impact of its larger domestic food production base and higher supply-chain durability.

We continue to view cost pressures as mainly temporal rather than indicative of a sustained inflationary cycle. Accordingly, we expect typical inflation to alleviate to 2.1% y/y in 2027 as short-lived supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we anticipate the US Federal Reserve to keep interest rates on hold until December, and local rate policies to follow fit.

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 vital profits and FX inflows, have actually been reduced by the US marine blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have collapsed to a trickle and we're anticipating 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 typical 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, monetary reforms, and the steady reopening of local trade links.

2026 Investment Climate in Arabia

The World Bank has actually slashed its 2026 development projection for Middle East economies, saying total GDP growth in the region is expected to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and destruction of energy and public facilities, had actually disrupted markets, increased financial 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 Poverty Outlook forecasts that the area's aggregate (omitting the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 projection has actually been devalued by 2.4 percentage points because the January projections, reflecting the negative effects of the ongoing conflict.

Saudi Arabia: Forecast 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, keeping in mind that Saudi Arabia's outlook stays the strongest amongst Gulf economies. United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 portion points since January.

Qatar: Significantly, development forecast for the Qatari economy has seen a sharp decrease of 11.0 percentage points given that January. The economy is now expected to tape a contraction of 5.7%, below an estimated growth of 5.3%, due to extreme blockage to melted gas materials. Qatar is a crucial player in the global energy market, with a worldwide market share of melted natural gas (LNG) materials ranging in between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Consequently, closing the strait would mean a total shutdown of the nation's financial lifeline, instantly halting profits inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has declined by 1.8 percentage points because January.