Inflation across the Gulf Cooperation Council remained relatively contained in June and July, despite sharp movements in oil and gas prices linked to the continuing US-Iran conflict, according to Kamco Invest’s latest GCC Inflation Update.
The report said central banks across the region, including the UAE Central Bank, kept interest rates unchanged during the first seven months of 2026. Their monetary policies continued to closely follow the US Federal Reserve, which maintained its benchmark rate at 3.5% to 3.75% in July amid expectations that borrowing costs could rise again in September.
Kamco Invest warned that renewed fighting between the United States and Iran could create fresh inflationary pressure worldwide. The World Bank has also raised concerns about possible disruption to fertiliser exports from the Middle East.
The Strait of Hormuz remains particularly important to global supply chains. The conflict has disrupted about 30% of global fertiliser shipments passing through the waterway, contributing to higher food prices in international markets.
Kamco Invest expects inflation in the UAE to average 2.5% in 2026 before easing to 2% in 2027, based on International Monetary Fund forecasts.
UAE sees highest GCC inflation
Dubai recorded the highest inflation rate among GCC economies in July, although price growth slowed slightly from the previous month.
The emirate’s Consumer Price Index rose 5.3% year on year in July, down from 5.7% in June. Higher fuel and imported food costs following the US-Iran conflict contributed to the increase.
Transport costs recorded one of the sharpest increases, rising 11.9% from a year earlier. Air passenger transport prices surged 41.4%, contributing significantly to the rise.
Food and beverage prices increased 7.8%, reflecting continued supply pressures, while housing and utilities costs climbed 7%. Restaurant and hotel prices rose 4.5%. On a monthly basis, Dubai’s overall consumer prices increased only 0.1% in July.
The UAE also raised petrol prices in June before cutting them in July as international crude prices declined.
Inflation across other Gulf economies
Saudi Arabia recorded annual inflation of 1.8% in July, remaining below the central bank’s 2% benchmark. Actual rental prices increased 4.2%, while personal effects rose 11.1%, driven partly by a 12% increase in jewellery and watch prices.
Kuwait’s inflation stood at 2.2% in June, with food and beverage prices rising 5.6%. Qatar also recorded inflation of 2.2%, with food and beverage costs jumping 12.7%.
Bahrain’s inflation reached 2.3% in June, while transport prices increased 10.6%.
Oman recorded the highest inflation rate in the GCC at 3.2% in July. Food and non-alcoholic beverage prices rose 7.3%, while transportation costs increased 6.5%.
The figures suggest that Gulf economies have so far contained broader price pressures, although continued conflict around key energy and trade routes could put renewed pressure on household costs in the months ahead.
