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  Bahrain creaks under the strain of war

  5 November 2026

  

   

  With a small economy and exports almost wholly reliant on passage through the Strait of Hormuz, Bahrain has been painfully exposed to the turmoil caused by the Iran war. The country’s social makeup – with a Shia majority ruled by a Sunni-dominated regime – is also showing signs of strain.

  The economy is expected to contract by 11.3% this year, according to the IMF’s latest Regional Economic Outlook report. That is not quite as bad as some of its neighbours, such as Kuwait and Qatar, but it is well above the 4.8% fall expected for the GCC as a whole.

  Just as importantly, Bahrain also starts from a much weaker base than its Gulf peers, with a smaller economy, limited hydrocarbon resources and high levels of government debt.

  “Countries with the largest reserve declines since the start of the conflict generally entered the shock with comfortable reserve positions, with Bahrain as a notable exception,” the IMF noted in its 22 October report.

  Physical disruption

  Iran’s closure of the Strait of Hormuz this year has cut Bahrain off from its most important trade route for both exports and imports. In addition, major industrial and military targets have been hit by Iran on multiple occasions, including the US naval base and the Aluminium Bahrain (Alba) plant.

  The latter suffered a 32% year-on-year drop in sales volumes and a 61% fall in output in the first half of the year as a result of the Iranian attacks – although higher aluminium prices and lower costs meant that the company’s revenues held steady and profits actually increased year-on-year.

  Other areas of the economy have been badly affected too, with the Bapco oil refinery, a desalination plant and an Amazon data centre all hit in Iranian strikes. The IMF also noted that Bahrain has seen one of the worst declines in hotel occupancy rates during the year. Inflation has also been rising, reaching an annual rate of 3% as of July.

  As a result, the government’s already weak financial position is under even more pressure. The Central Bank of Bahrain’s reserves have slumped sharply since the start of the war, falling from BD1.8bn ($4.8bn) as the war broke out, to a low of BD568m three months later. They recovered some of the ground lost in the following months, but remain well below the pre-war level. Reserves stood at BD887m by September, supported by drawing on a BD2bn ($5.4bn) currency swap line provided by the UAE in early April.

  Total public debt had reached BD20.3bn at the end of August, the most recent data available, up from BD18.2bn a year earlier. That is significantly larger than the country’s GDP, which stood at BD15.7bn in 2025 and is expected to end this year at just BD13.9bn.

  To make matters worse, the markets have been pushing up Bahrain’s borrowing costs to levels not seen since 2018, when the government had to turn to Kuwait, Saudi Arabia and the UAE for a bailout to avoid a potential sovereign default.

  External support

  With no easy way to reduce its debts or plug its budget deficit, Bahrain is likely to seek more assistance from its wealthy neighbours – although any aid will likely come with demands for spending restraint and other reforms that will be uncomfortable for the government to accept.

  The appetite of some neighbouring states may also be more limited than in the past, given their own economies have been weakened by the war, but King Hamad Bin Isa Al-Khalifa’s close ties with the UAE leadership in particular are likely to ensure some help is forthcoming.

  Asharq Bloomberg reported in late October that Manama has been holding talks with neighbouring states for a fresh round of support, with the UAE expected to emerge with a leading role. However, the timing and scale of any bailout remain unclear.

  Without external assistance, the country’s finances are likely to deteriorate further. Ratings agency Capital Intelligence said in an October report that it expected debt levels to rise further in 2027-28, with the budget deficit averaging 9.3% of GDP in those years.

  “The burden of government debt on the budget is also very high, with interest payments projected to average 30.7% of revenues in 2026-28, up from 27.1% in 2025,” it noted.

  King Hamad Bin Isa Al-Khalifa’s close ties with the UAE leadership in particular are likely to ensure some help is forthcoming

  Political tensions

  Politically, Manama has appeared increasingly cautious towards its own citizens, with planned elections for both municipal councils and the Council of Representatives delayed until next year. Announcing the postponement of the council elections in mid-October, deputy prime minister Sheikh Khalid Bin Abdulla Al-Khalifa referred vaguely to “the current circumstances and their resulting effects” as the reason for the delay.

  The postponement removes a formal channel for the public to express grievances about the country’s current situation. At the same time, the authorities have moved against perceived support for Iran during the conflict. More than 600 people have been arrested this year on charges including espionage and supporting an enemy state, according to the Bahrain Institute for Rights and Democracy (Bird), a London-based advocacy group that is critical of the government. Dozens of people have also had their citizenship revoked.

  “Since the outbreak of the Iran war, repression in Bahrain has intensified sharply,” said Bird advocacy director Sayed Ahmed Alwadaei.

  Some analysts warn that the crackdown could prove counterproductive. The Bahrain researcher at conflict monitoring group Acled said that tensions between the government and its Shia opposition were gradually placing the country at high risk of instability.

  The economic outlook could change quickly if a resolution to the Iran-US conflict is found. The IMF predicts that the economy could rebound to a growth rate of 13.9% next year, before settling back to a more sustainable 3.1% the year after – but that depends on Gulf trade routes reopening and energy production normalising. The country’s political tensions will be harder to resolve.

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  Dominic Dudley
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  Engie completes refinancing of Oman power plants

  5 November 2026

  French developer Engie has announced that it has reached financial close on the refinancing of the Sohar 2 and Barka 3 independent power projects (IPPs) in Oman.

  The transaction follows 15-year extensions to the plants’ power purchase agreements (PPAs) in March, securing their long-term operations through to 2043.

  As previously reported by MEED, the new agreements for the 750MW Sohar 2 and 750MW Barka 3 IPPs will take effect on 1 April 2028. 

  The refinancing aligns the projects’ debt profiles with the extended PPA terms and establishes a long-term financing framework to support future capital expenditure. This includes refurbishment works aimed at improving the reliability and long-term performance of both assets.

  Al-Batinah Power Company and Al-Suwadi Power Company operate the Sohar 2 and Barka 3 power plants, respectively.

  According to regional projects tracker MEED Projects, Nama PWP signed the original PPA for the Barka 3 project in 2010 with a consortium led by Gaz de France (GDF) Suez under a special purpose vehicle called Al-Suwadi Power Company.

  The shareholders comprised GDF Suez (46%), Bahwan Engineering Company (22%), Shikoku Electric Power Corporation (11%), Sojitz Corporation (11%)  and the Public Authority for Social Insurance (10%).

  In 2015, GDF Suez was rebranded as Engie following a strategic shift towards low-carbon energy and utilities.

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  Mark Dowdall
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  Aramco seeks to expand East-West crude pipeline

  5 November 2026

  Saudi Aramco is planning to expand its East-West oil pipeline network, aiming to strengthen the kingdom’s ability to transport crude oil while bypassing the Strait of Hormuz.

  Aramco operates the 1,200-kilometre East-West pipeline from Abqaiq in the Eastern Province to Yanbu on the Red Sea coast. The pipeline currently has an oil transportation capacity of 7 million barrels a day (b/d).

  The pipeline was targeted by Houthi missiles in September and by Iran in April. Aramco resumed crude oil exports through the pipeline at the start of October.

  “With regard to the expansion to our East-West pipeline and the additional networks that we are building, this work has already started,” Amin Nasser, Aramco’s president and CEO, told analysts on a call following the company’s announcement of its Q3 2026 financial results on 3 November.

  Nasser had previously said in an interview with Al Arabiya Business that Aramco had begun engineering work on the East-West pipeline expansion project during the early stages of the US-Iran conflict.

  In October, Saudi Energy Minister Prince Abdulaziz Bin Salman said that the kingdom was looking to expand its crude oil export capacity by pipeline to as much as 10 million b/d. The plans would involve repurposing a domestic gas pipeline and investing in the existing East-West pipeline network.

  Aramco uses three main routes to export crude oil: the Gulf, via the Strait of Hormuz; the Red Sea, via the Bab El-Mandeb strait; and the Mediterranean, via Sidi Kerir in Egypt. The company also uses overseas oil-storage facilities in South Korea, Japan, the Netherlands and Sidi Kerir, and is working with partners to expand storage capacity, particularly in Asia.

  Aramco is also undertaking engineering work on additional export routes, Nasser said.

  He added that the company would not disclose details of the proposed routes until it made final investment decisions.

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  Indrajit Sen
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  SAR tenders railway track design framework

  5 November 2026

  

   

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  Saudi Arabia Railways (SAR) has invited consultants to bid by 14 December for a framework agreement covering railway track design services.

  The state-owned operator is seeking to accelerate the delivery of smaller projects across its network.

  SAR has scheduled a pre-tender meeting for 12 November.

  Under the framework, SAR will appoint a panel of specialist consultants to carry out design work through work orders or task orders issued as required. This will remove the need for SAR to launch a separate tender for each project.

  SAR said a long-term contract with several specialist service providers would benefit all parties, particularly for smaller projects.

  SAR will detail the required works and communicate them to the selected consultants through each work order or task order.

  The scope covers engineering studies, as well as concept, preliminary and detailed design for railway infrastructure. Services will include surveys, alignment design, geotechnical assessments, cost estimation and construction support.

  Consultants will be expected to produce drawings, reports, risk registers, bills of quantities and other design documentation. All deliverables must comply with SAR standards for UIC 60 track systems and associated infrastructure.

  SAR said it is seeking partnerships with competent consultants to supply track and track infrastructure design services under the terms of the tender document.

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  Yasir Iqbal
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  Aramco commissions Zuluf field oil increment project

  5 November 2026

  Saudi Aramco has announced the start of oil production at the Zuluf oil increment project in Saudi Arabia, on which it is estimated to have spent about $7bn in 2022.

  The Saudi energy company made the announcement as part of its third-quarter 2026 financial results, in which it reported adjusted net income of $31.2bn, up 9% year on year.

  The Zuluf oil increment project involved substantial onshore and offshore work at the field, located in the Gulf about 40 kilometres off Saudi Arabia’s northeastern coast.

  The engineering, procurement and construction (EPC) scope was divided into two onshore packages and five offshore packages.

  Aramco selected Japan’s JGC Holdings Corporation in May 2022 for the two main onshore packages of the Zuluf field development. Together, the packages were estimated to be worth up to $3.5bn.

  Package 1 was estimated to be the larger of the two onshore packages, with a contract value of about $2bn-$2.5bn. It covered EPC work to build hydrocarbon-processing facilities for the Zuluf development, principally an onshore gas-oil separation plant.

  Package 2 covered utilities and water-injection facilities and was estimated to be worth about $1bn.

  Before awarding the onshore contracts, Aramco had awarded more than $4bn of contracts across five main offshore engineering, procurement, construction and installation packages. The awards went to US-headquartered McDermott International; a consortium of India’s Larsen & Toubro Hydrocarbon Engineering and UK-headquartered Subsea7; and Abu Dhabi’s NMDC Energy, then known as National Petroleum Construction Company.

  Since the 2022 EPC awards, Aramco has invested further in maintaining and upgrading infrastructure at the Zuluf field. The work supports the company’s objective of maintaining its maximum sustained crude oil production capacity at 12 million barrels a day (b/d).

  Other upstream projects

  In its Q3 2026 results statement, Aramco also announced EPC progress on other key upstream oil and gas projects, including:

  Jafurah phase two – Aramco awarded 16 contracts, worth a combined total of about $12.4bn, on 30 June 2024 for the second expansion phase of the Jafurah unconventional gas development programme in the Eastern Province.

  The second phase aims to raise the field’s processing potential to up to 2 billion cubic feet a day (cf/d) of raw gas. The EPC scope of work includes constructing gas compression facilities and associated pipelines, and expanding the Jafurah gas plant, including the construction of gas processing trains, utilities, sulphur and export facilities, Aramco said in a statement.

  Fadhili gas plant expansion – Through the estimated $7.7bn project, Aramco aims to increase the Fadhili gas plant’s processing capacity from 2.5 billion cf/d to up to 4 billion cf/d. The expansion includes three new processing trains, each with a capacity of 500 million cf/d.

  Aramco awarded contracts for four main EPC packages of the Fadhili gas plant expansion project in April 2024 to South Korean contractors Samsung E&A and GS Engineering & Construction and Saudi contractor Nesma & Partners.

  Dammam development project – The project represents the second development phase of the Dammam field. Its objective is to install infrastructure, including pipelines, trunklines and pumps, to increase the field’s crude oil production capacity by 25,000 b/d and 50,000 b/d in separate phases.

  Al-Khobar-based Denys Arabia won the main EPC contract for the Dammam second field development phase in July 2024. The contract was estimated to be worth more than $500m.

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  Indrajit Sen