GCC Inflation Stays Muted As Middle East Conflict Raises Global Price Fears

RIYADH: Inflation across the Gulf Cooperation Council remained subdued in June and July despite oil and gas price fluctuations linked to the ongoing US-Iran conflict, according to Kamco Invest. 

In its latest report, the Kuwait-based investment firm said the geopolitical situation in the Middle East is expected to sustain upward pressure on global inflation in the short term, while intermittent hostilities between the US and Iran are poised to lift oil prices, dampen global economic growth and drive up interest rates. 

The report’s assessment is broadly in line with projections from Oxford Economics in June, which forecast GCC inflation at 2.6 percent in 2026, easing to 2.1 percent in 2027 as temporary supply-side pressures dissipate. 

“In the GCC, inflation remained subdued in June and July-2026, despite oil and gas price fluctuations prompted by the ongoing US-Iran conflict. In Saudi Arabia, annual inflation remained under the 2 percent central bank benchmark, increasing by 1.8 percent year on year in July,” said Kamco Invest. 

Wider regional angle 

Kuwait’s Consumer Price Index increased 2.2 percent year on year in June, mainly supported by higher food and beverage prices. 

 

Oman’s inflation rose 3.2 percent year on year in July, the highest reading among GCC countries that month. Food and non-alcoholic beverages and transportation were the main drivers. 

Dubai’s consumer price index rose 5.3 percent year on year in July, down from a 5.7 percent peak in June. Kamco attributed the increase to instability stemming from the US-Iran war, which resulted in higher fuel and imported food prices. 

Bahrain’s inflation rate increased 2.3 percent year on year in June, with the general CPI closing the month at 103.7 points. The index rose 0.9 percent month on month. 

Global picture 

In the US, inflation increased 3.4 percent year on year in July. The Consumer Price Index for All Urban Consumers rose 0.1 percent on a seasonally adjusted basis in July after a 0.4 percent decline in June, according to the US Bureau of Labor Statistics. Core CPI, excluding food and energy, increased 0.2 percent in July. 

Kamco said the CPI reading matched market forecasts, while the Federal Reserve’s preferred Personal Consumption Expenditures gauge came in slightly higher than anticipated. 

In the eurozone, annual inflation reached 2.9 percent in July, up from 2.8 percent in June and in line with market expectations, according to Eurostat. Inflation in the wider EU rose to 3 percent from 2.9 percent. 

Kamco said the Middle East conflict and higher energy costs remained key drivers of European inflation in July, given the EU’s status as a net energy importer.