Gulf States Push Forward on Major Projects Despite Conflict Cost Pressures

RIYADH: Saudi Arabia and the United Arab Emirates are on track to drive a substantial pipeline of major infrastructure and industrial projects through the remainder of 2026, even as regional conflict pushes up shipping, insurance and construction costs, according to analysis from Abu Dhabi Commercial Bank.

The ADCB report, cited by Asharq Bloomberg, frames Gulf Cooperation Council governments as firmly committed to advancing significant development initiatives despite cost headwinds tied to tensions linked to Iran. Monica Malik, the bank’s chief economist, pointed to second-quarter investment data as evidence of that commitment. “The data continues to indicate a strong willingness to progress with key development plans,” she wrote.

That willingness is now being tested by a specific strategic pressure. The conflict has created new urgency around infrastructure investment aimed at building supply-chain resilience and reducing exposure to traditional shipping corridors. Projects focused on diversifying export routes and establishing alternative logistics pathways have gained strategic importance, particularly those that would lessen dependence on the Strait of Hormuz for hydrocarbon and chemical shipments.

“Regional developments have reinforced the importance of building greater resilience by diversifying routes for key exports, including hydrocarbons and chemicals,” Malik said. “We expect projects linked to these initiatives to become more visible toward end-2026 and into 2027.”

In the UAE, the project pipeline includes more than $10 billion in contracts for expanding Dubai’s Al Maktoum International Airport, alongside a $10 billion award expected for the second phase of the TA’ZIZ industrial chemicals zone in Abu Dhabi’s Al Ruwais Industrial City. Several oil and gas contracts are also anticipated to reach the market.

Saudi Arabia’s project activity is expected to be anchored by transportation infrastructure during the second half of the year. Riyadh Metro’s Line 7, valued at approximately $15 billion, has been identified as a potential third-quarter award that could signal momentum in the Kingdom’s broader investment agenda.

By contrast, the broader Gulf region recorded a contraction in contract awards during the second quarter, with values falling 26.1 percent compared to the previous three-month period. The decline, though, occurred against a stronger baseline: second-quarter awards remained 32 percent higher than the same period in 2025 and aligned with levels recorded in the final quarter of 2025. Saudi Arabia showed particular strength during the second quarter, with a notable jump in awards that Malik characterized as tentatively pointing to progress in the next phase of the Kingdom’s investment program. The UAE recorded the highest absolute value of awards across the Gulf during the first half of 2026.

Several factors have helped projects maintain their schedules despite cost pressures. The report cited raw-material stockpiling, the establishment of alternative transport routes and increased regional production of critical building materials as key supports for project momentum. Some tenders have nonetheless experienced delays as rerouting expenses, shipping fees, fuel surcharges and insurance premiums have pushed construction prices higher (a pattern the report treats as a scheduling challenge rather than a structural brake on investment).

Whether that distinction holds as costs remain elevated will be the defining question for Gulf project pipelines heading into 2027.