Muscat – The GCC projects market slowed in the first quarter of 2026 as regional tensions and distruption linked to the US-Iran conflict hit project activity, with the outlook for the rest of the year also expected to remain weak.

The total value of contracts awarded across the GCC fell 9.7% year-on-year to $61.2bn in Q1 2026, compared with $67.8bn in the same period of 2025, according to a report by Kamco Investment citing data from MEED Projects.

The contraction was driven largely by a sharp decline in contract awards in Saudi Arabia and the United Arab Emirates, the region’s two largest project markets. In contrast, Kuwait, Oman and Qatar recorded growth during the same period, the report said.

The number of contract awards dropped significantly over the quarter, from 84 in January and 80 in February to just 25 in March 2026. The value of awards followed a similar trend, falling from $20.5bn in January and $26bn in February to $11.8bn in March.

‘The war has already affected multiple aspects of life and business in GCC countries, including supply chain delays caused by shipping disruptions in the Strait of Hormuz, as well as dampening sentiment in key sectors such as real estate and tourism,’ the report noted.

‘Energy exports remain the primary source of revenue for GCC economies. As such, any disruption to oil and gas production and exports could significantly constrain governments’ ability to fund projects’, the report added.

The closure of the Strait of Hormuz and attacks on energy infrastructure have already driven a sharp rise in oil prices and forced the shutdown of several hydrocarbon production facilities in the region.

By country, contract awards in Saudi Arabia plunged 51.1% year-on-year to $11bn in Q1 2026, down from $22.5bn a year earlier. In contrast, Kuwait recorded a more than fivefold increase in project awards to $8.1bn, compared with $1.5bn in Q1 2025.

The UAE also saw contract awards decline by 18.5% year-on-year to $29.2bn, from $35.8bn.

2026 outlook remains weak

Looking ahead, GCC project activity is expected to remain subdued in 2026, weighed down by the broader economic fallout from the US-Iran conflict, according to Kamco Investment.

‘The conflict is likely to undermine what had been a strong outlook for the GCC projects market this year. So far, three countries – Kuwait, Qatar and Bahrain – have declared force majeure on parts of their energy production and export infrastructure, while others have reduced output,’ the report said.

This disruption is expected to weaken governments’ capacity to finance new projects during the year, it added.

Despite the near-term slowdown, MEED Projects data indicates a robust pipeline of around $2tn in planned projects across the GCC. Saudi Arabia accounts for nearly half of this total, followed by the UAE with 27.5%.

By sector, construction is set to attract the largest share of upcoming projects at 39.7%, followed by transport (16.3%) and power (15.7%).

Most planned projects remain at early stages, with schemes in the design phase valued at $841.5bn. This is followed by projects in the study stage worth $554.1bn, and those under bid evaluation totalling $220.4bn.

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