Iraq recorded a fiscal deficit of $5 billion in the first four months of 2026 after the Iran war severely curtailed oil export revenues, heaping pressure on the new government to pass a budget it has yet to approve.

Spending over the period stood at $28.2 billion against revenues of $23.2 billion, according to the finance ministry. Oil revenues accounted for $19.4 billion of total income, with the remainder coming from customs duties and government fees. Civil servant wages were the single largest item of expenditure at $15.3 billion — more than half of all spending.

"There is a pressing need for the new government to work to release a full budget because the delay will hurt growth and projects," said Nabil Al-Marsoomi, an economics professor at Basra University. "The absence of a budget limits the government's ability to confront the financial crisis, as its approval provides legal cover for internal and external borrowing, as well as liquidity management through the central bank."

The revenue shortfall stems directly from the disruption to oil exports caused by Iran's near-closure of the Strait of Hormuz, which left Iraq pumping as little as a third of the roughly 3.4 million barrels per day on which last year's budget was based. The government has been spending at a monthly average of just over 8% of last year's total expenditure as a result.

Parliament has submitted a proposal for an emergency budget of between $14.9 billion and $22.4 billion to keep government offices running and protect already-awarded contracts. However, the cabinet of Prime Minister Ali Al-Zaidi, who took office in mid-May, has held only a handful of meetings and has yet to make a decision on a new budget.

OPEC has forecast global oil demand will climb from 105 million barrels per day in 2025 to 113 million bpd by 2030, calling for annual investment of more than $700 billion in the sector to meet long-term needs.

The projections were published in the group's 2026 World Oil Outlook, launched at the OPEC Secretariat in Vienna. The report sees oil demand rising to 119 million bpd by 2035 and 124 million bpd by 2050, with no peak in sight. Overall global energy demand is projected to rise 23% by 2050, driven by expanding economies in India, the Middle East, Africa and Latin America, as well as policy shifts in the US and Europe expected to favour continued oil consumption.

"For oil alone, investments of $17.7 trillion from 2026 to 2050 — or over $700 billion per annum — are needed to meet long-term demand," said OPEC Secretary-General Haitham Al Ghais, adding that the scale of global energy needs requires sustained investment across all energy sources and technologies.

The outlook lands at a volatile moment for energy markets. The Iran war earlier this year pushed oil prices as high as $120 a barrel in March, while a peace agreement announced by US President Donald Trump this week sent prices sharply lower. Brent crude was trading at $79.42 a barrel on Friday.

The report also noted a broader shift in the global energy policy landscape, with increased emphasis on energy security and affordability driving policy adjustments expected to support oil demand in the medium and long term.

The findings come as OPEC navigates a period of internal change. The UAE announced its departure from both OPEC and the wider OPEC+ grouping in April.

Iran’s central bank said it will release $2 billion in foreign currency for the industrial sector from Saturday, after gaining improved access to frozen overseas assets and benefiting from an easing of restrictions on oil exports under a temporary U.S.-Iran arrangement.

The move comes as Tehran tries to stabilize its economy, where foreign-exchange shortages have fed inflation and made it harder to pay for imports of essential goods.

Central Bank Governor Abdolnasser Hemmati said the bank would channel part of its stronger reserves into the economy, with the initial allocation aimed at supporting industrial imports and helping contain price pressures. The broader deal is tied to a 60-day U.S. sanctions waiver that allows Iranian crude and petroleum exports to resume more freely, while also improving access to some of Iran’s frozen funds abroad.

The timing matters because oil exports are Iran’s main source of hard currency, and any sanctions relief can quickly improve the central bank’s room to maneuver. However, the relief is temporary and does not amount to a full removal of sanctions, so the durability of the funding boost will depend on how the wider negotiations develop.

But it does highlight the geopolitical leverage embedded in oil sanctions. By loosening pressure on Iran’s export revenues, Washington has signaled a pragmatic willingness to test engagement, even as the broader confrontation over Iran’s nuclear and regional role remains unresolved.

The Financial Action Task Force (FATF) has placed Iraq on its grey list of countries with deficiencies in anti-money-laundering and counterterrorism financing laws, while keeping Kuwait on the list despite recent reforms. Algeria, by contrast, was removed after regulators acknowledged its progress.

The Paris-based watchdog, which met on Friday, said Iraq requires work on managing cash-related risks, increasing money-laundering and terrorist-financing investigations, and making better use of financial intelligence.

"Iraq has been added to the grey list as work is needed to tackle risks related to cash, increase money-laundering and terrorist-financing investigations and enhance the use of financial information," said FATF president Elisa de Anda Madrazo.

The listing comes as Iraq's new prime minister, Ali Al-Zaidi, who took office in May, has made economic rebuilding, foreign investment, and anti-corruption central to his agenda. In a related development, Al-Zaidi recently replaced long-serving central bank governor Ali Al-Allaq with Nizar Hussein, a former lawyer who previously headed the central bank's anti-money-laundering and terror-funding unit.

"This move will send a positive signal to the West. I also believe the central bank will pursue its plan to overhaul the banking sector," said Nabil Al-Marsoomi, an economics professor at an Iraqi university.

Iraq, OPEC's second-largest oil producer, has been working to restructure a banking sector weakened by bad loans and decades of corruption. Parliament passed the country's first anti-laundering and terror-financing law in 2015, and authorities received over 2,700 reports of suspected financial crimes in the first half of 2025 alone.

Kuwait, meanwhile, remains on the grey list despite closing nearly 73,700 companies that failed to disclose their beneficial owners and introducing a series of tighter financial regulations over the past two years. The Gulf state first enacted comprehensive anti-laundering legislation in 2013 under Western pressure, with penalties including fines and prison terms of up to ten years.

"The measures taken by Kuwait in the past period are the most drastic in many years. I believe it is a matter of time before Kuwait is removed from the FATF grey list," said Ali Al-Enzi, manager of Al-Manakh economic consulting centre in Kuwait.

Algeria's removal from the list follows progress in risk-based supervision, beneficial ownership transparency, and targeted financial sanctions. Key measures included a central bank circular banning cash deposits into corporate bank accounts, introduced in December, and tighter oversight of the gold and jewellery trade, where dealers are now required to report suspicious transactions immediately to Algeria's Financial Intelligence Unit.

FATF, founded in 1989 on a G7 initiative, publishes its black and grey lists three times a year. Algeria had been placed on the grey list in late 2024.

Gulf economies are expected to grow significantly in 2027 after suffering an economic slowdown in recent months caused by the Iran-US conflict. 

The GCC (Gulf Cooperation Council) economies are expected to grow by 8.1% next year, with energy flows, tourism and investor sentiment to gradually normalise as war disruptions subside, the Institute of Chartered Accountants in England and Wales (ICAEW) and Oxford Economics said in a new report. 

Regional economies incurred substantial economic damage as the conflict's shockwaves, whether through missile strikes on critical energy and oil architecture, disrupted shipping lanes, or upended trade and aviation networks, swept through markets, industries and countries. 

Saudi Arabia’s national output for the first quarter slowed to 3% year on year and non-oil activities expanded at its slowest pace since the Covid-19 pandemic. The kingdom’s seasonally adjusted GDP contracted 1.2% quarter-on-quarter driven by a 6.8% fall in oil activities as the Strait of Hormuz disruption hit late in the quarter, the Middle East's economic update revealed. 

Barring Oman, all GCC producers alongside Iran and Iraq, have suffered extensive energy production losses, with overall production having dipped to half of pre-war levels. Decoupling efforts, including Saudi Arabia's East-West Pipeline and the UAE's Habshan-Fujairah pipeline, have helped prevent an even larger plunge in output. 

Meanwhile, economies such as Kuwait, Iran, Iraq and Qatar, bore the brunt of the conflict, for their inability to avoid the disruption to regional shipping, war-driven infrastructure damage and tourism losses. 

“We forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in several decades. We then expect a 23.5% rebound next year, driven largely by normalisation from a severely depressed base,” the report added. 

Non-oil activity in Saudi Arabia and the UAE, however, appears on a rebound with May PMI surveys reporting the strongest output levels in three months, driven by improved domestic demand. 

“Overall, we expect a 1.1% contraction in GCC non-energy sectors this year - compared to 4.2% growth pre-war - and a gradual recovery over the rest of the decade,” the study stated. 

The Middle East is expected to contract 4.1% this year, surpassing the downturn witnessed during the first year of the Covid-19 pandemic, according to the study. Iran’s GDP is likely to shrink by 10.8% this year, while Iraq’s economy is estimated to contract further by around 22% in 2026, with a sharp 33% rebound in 2027 as oil exports normalise. Lebanon faces a 6.5% contraction in 2026 amid ongoing Israeli strikes, occupation in the south of the country and forced displacement of 20-25% of the population, the report added. 

“By contrast, Syria continues to reintegrate into the global economy after more than a decade of civil war. We anticipate GDP growth to average 9.6% over 2026-2027, supported by renewed investment,” the study said. 

Oil prices have risen around 10-12% since the conflict began on February 28, hitting a year-high peak of $115 in late March before easing to around $86 on June 12. Brent prices stood at $78.5 at 11.27pm GMT time on June 18.  

“In our baseline forecast, we expect oil prices to remain above pre-war levels as exports gradually normalise, with Brent oil price averaging around $90 per barrel this year. In the medium term, we expect oil prices to be slightly lower than our pre-war baseline, as the UAE’s departure from OPEC+ allows for a gradual increase in its output towards the 5mn barrel per day production target once trade normalises,” the study adds. 

Türkiye has announced its new artificial intelligence plan under which it aims to increase its national data centre capacity to one gigawatt by the end of the decade. 

The country will mobilize at least $10 billion in private-sector investment for data centres, cloud computing, and AI infrastructure under the new plan, Turkish President Tayypi Erdogan announced at the Türkiye Artificial Intelligence Summit held in Istanbul last week. 

The AI action plan is grounded in four key pillars – discover, benefit, produce and govern – with four complementary actions under each pillar. 

Pursuant to the plan, the government aims to train 10,000 advanced AI specialists, 100,000 AI application professionals, and dedicate at least 2% of public investment programs to AI projects. AI literacy workshops will be launched in all 81 provinces to train five million citizens within two years.

The premier also announced plans to make at least 2,000 public datasets available to citizens through a National Data Library, including data from sectors such as health, agriculture, defense, and e-commerce.

“We will launch the National Artificial Intelligence Literacy Program to ensure that people of all ages understand artificial intelligence correctly and use it safely,” Erdogan said.

Turkiye has launched a national technology initiative, via which it is looking to build and own its own tech models.

The beta version of Turkiye’s first open-source national large language model (LLM), T3AI, was launched last year. The government introduced BILGE, its latest LLM to the audience at the AI summit.  

The country also unveiled a $1.26-million- initiative last year to develop Turkish LLMs to advance homegrown navigation and mapping technologies.

Türkiye and Saudi Arabia have signed two preliminary agreements to foster cooperation in logistics and drive regional connectivity. 

The two memorandums of understanding signed by Saudi and Turkish transport ministers will facilitate the construction of logistics centres and encourage joint initiatives across all facets of the railway sector. 

Transport volumes between Türkiye and Saudi Arabia hovered around 20,000 prior to 2012. 

“Although we currently fall short of that figure due to regional developments, our goal is to take our cooperation beyond even that level,” state-owned Anadolu Agency quoted Turkish transport and infrastructure minister Abdulkadir Uraloglu as saying.

Türkiye plans to modernize the historic Hejaz Railway and extend it to Oman to create an alternative global trade route to the Strait of Hormuz as well as for tourism purposes, according to Uraloglu.

The Hejaz Railway was originally built between 1900 and 1908, stretching about 1,322 kilometers between Damascus in Syria and Medina in Saudi Arabia. It was later expanded to nearly 1,900 kilometers with additional lines. 

Türkiye inked agreements with Syria and Jordan in April to modernize their railway systems with the eventual aim to create a Southern Europe-Persian Gulf transport corridor. The network was expected to take four to five years to build, Turkish transport minister had said at the time.

The initial stage involves connecting Türkiye to Aleppo, utilizing the existing Aleppo-Damascus-Jordan network, passing through Saudi cities of Medina and Makkah, with Oman as its final destination. 

Türkiye and Saudi Arabia are monitoring developments on the Syria-Jordan-Iraq routes, Uraloglu said at the recent signing. “Two test runs starting from Türkiye through Iraq and extending to Saudi Arabia have clearly demonstrated the feasibility of this route."

The road project extending from Iraq’s Basra Gulf to the Turkish border is also underway, with its design phase complete. The corridor, which includes highways, railways, energy, and communication lines, will be realized through international funding in partnership with the UAE, Qatar, Iraq, and Türkiye, according to the media body. 

The construction of new and revival of old or damaged transport projects is key to establishing regional connectivity. Last month, Lebanon launched a tender process for a railway rehabilitation project linking the northern city of Tripoli with the Abboudiyeh area on the Lebanon-Syria border. 

Türkiye restored a strategic 350-kilometer railway along the Syrian border to freight traffic in April, after its first comprehensive rehabilitation in over a decade.  
 

Dubai's office market posted a sharp rise in activity in the first quarter of 2026, with transaction values more than tripling year-on-year to AED8.2 billion ($2.2 billion) across roughly 1,600 deals, even as regional tensions weighed on volumes in March.

Sales prices climbed nearly 25% year on year, and rents rose around 20%, driven in part by strong demand for off-plan offices, a segment that had barely registered before this year. Al Sufouh 1, Business Bay and Jumeirah Lakes Towers accounted for the bulk of activity, with the top five locations representing over 70% of all first-quarter transactions.

January and February drove the bulk of deal volumes, accounting for more than four-fifths of the quarter's activity. March saw a year-on-year dip of over 10%, with ready transactions falling by nearly two-thirds as regional tensions escalated following the outbreak of the Iran conflict on February 28.

Commercial real estate data for April and May shows transaction volumes broadly flat year on year at around 900, though prices continued to climb with the median rising by three-quarters to approximately AED3.2 million and the per-square-foot rate more than doubling to AED3,600.

Company formation figures point to sustained occupier demand. Dubai International Financial Centre registered 775 new companies in the first quarter, with March its strongest month, up nearly 60% year on year. Abu Dhabi Global Market reported a 5% year-on-year rise in company registrations in March.

Chinese electric vehicle maker BYD has suspended plans for a $1 billion factory in Turkiye, opting instead to expand production capacity in Hungary as EU tariffs make European manufacturing more cost-effective than importing from nearby markets.

The company has put on hold a proposed plant in the Aegean province of Manisa, announced in mid-2024 and intended to produce 150,000 electric and hybrid vehicles annually, with its first compact EV now set to come off a Hungarian assembly line by year-end.

The move deals a significant blow to Turkiye's automotive ambitions. "There would have been benefits for supply chains, jobs, research and development, battery production, side industries as well as AI, so many diverse contributions," said Anıl Şentürk, chair of the automotive committee at the Istanbul Chamber of Commerce. "This was a direct foreign investment, so its contribution would not only have been to the automotive sector but the country's economy itself."

The Manisa facility, when fully operational, would have employed 5,000 people, with most of its output destined for export. The project's suspension follows rising EU tariffs on imported electric and hybrid vehicles, which undermined the cost case for building in Turkiye rather than within the bloc. BYD is also in discussions to take on space at an existing plant in Germany.

The suspension carries additional risks for BYD in Turkiye. The Turkish government granted the company an exemption on most import tariffs in exchange for the investment commitment, an arrangement that helped BYD capture a 24% share of EV and hybrid sales in the country last year. Halting or cancelling the Manisa plant could expose the company to legal action and the loss of those trade advantages.

"If the decision is final, BYD is most likely to be stripped of their advantages in the local market and potentially lose this market to other Chinese competitors or European models," Şentürk said.

BYD has not ruled out returning to Turkey at a later date.