Geopolitical tremors from the Iran war have begun showing up in the Gulf’s construction and infrastructure pipeline, with project awards across the GCC retreating sharply in the opening quarter of 2026, underscoring how regional instability is spilling into investment decisions.
New data from Kamco Invest, drawing on MEED figures, shows total contract awards across the bloc fell 9.7% year-on-year to $61.2 billion, down from $67.8 billion in the same period last year. The decline was led by a pronounced slowdown in Saudi Arabia and the UAE, the two dominant engines of the region’s projects market.
The deceleration gathered pace through the quarter. Contract awards dropped from 84 deals in January and 80 in February to only 25 in March. The value of those awards also tumbled, sinking from $20.5 billion in January and $26 billion in February to just $11.8 billion in March, illustrating how quickly momentum faded.
Saudi Arabia posted one of the steepest pullbacks, with awards plunging 51.1% to $11 billion, down from $22.5 billion a year earlier. The UAE also saw activity cool, with contract awards declining 18.5% to $29.2 billion from $35.8 billion.
Not all markets moved in reverse. Kuwait emerged as a notable outlier, with project awards surging more than fivefold to $8.1 billion compared with $1.5 billion in the prior-year quarter. Oman and Qatar also registered gains, helping cushion the broader regional downturn.
Analysts point to the war’s growing economic spillover as a central factor behind the slowdown. Disruptions in shipping through the Strait of Hormuz, strain on supply chains, and weakened investor sentiment in sectors such as property and tourism have added layers of uncertainty to project planning.
For the Gulf, where hydrocarbons underpin public spending, concerns run deeper than logistics. Any prolonged hit to oil and gas production or exports could pressure government revenues and, by extension, infrastructure funding. Recent attacks on energy assets and disruptions tied to the Strait have already pushed oil prices higher while unsettling production in some facilities.
The broader macro backdrop has added to the caution. The International Monetary Fund recently lowered its 2026 global growth forecast to 2%, while slashing Middle East and North Africa growth projections to 1.1%. Growth estimates were revised downward across GCC economies, with Qatar seeing the sharpest downgrade.
That softer growth outlook is raising questions over how aggressively governments can sustain project pipelines this year. Kamco Invest expects 2026 to remain subdued for contract activity as regional and global headwinds persist.
Yet the longer-term picture may not be entirely bleak. A moderate economic recovery anticipated in 2027 could support a rebound in project awards, offering the possibility that today’s slowdown proves more of a pause than a structural break in the Gulf’s vast development drive.
