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  Gulf economies under fire

  26 March 2026

  

   

  When the first missiles and drones were fired at the GCC on 28 February, the region’s economic story pivoted abruptly, from long-term vision-building to near-term resilience.

  The conflict is now the Gulf’s most consequential economic stress test in a generation. It is challenging the safe haven premium that underpins capital inflows, while disrupting the physical networks that keep the region’s economies running, from energy exports and shipping lanes to airports and tourism.

  Over the past two decades, GCC governments have worked to pair diversification with an image of stability: open economies, predictable regulation and security that felt, to many investors, close to non-negotiable.

  This crisis has reopened an older question last asked during the 1990 to 1991 Gulf War: not simply how fast the Gulf can grow, but whether it can remain investable and operational under sustained security risk. The early evidence is mixed and still emerging.

  Energy infrastructure has been damaged and supply chains have been paralysed, but other parts of the economy, such as retail and construction, have continued to operate largely as normal.

  LNG strike

  The clearest and most quantifiable example of the economic toll came when Iranian strikes targeted Ras Laffan Industrial City in Qatar. The damage reported by QatarEnergy is significant. Liquefied natural gas (LNG)-producing trains 4 and 6, which account for about 17% of Qatar’s total LNG exports, need repairing. The expected revenue loss is $20bn a year.

  In a statement, QatarEnergy president and CEO Saad Sherida Al-Kaabi said the repairs will take three to five years to complete, underlining the long-term impact on the Qatari economy. JP Morgan estimates that Qatar’s GDP could contract by 9% this year.

  Qatar is not the only GCC state to have suffered damage to its energy infrastructure. Bahrain, Kuwait, Oman, Saudi Arabia and the UAE have all had energy assets targeted.

  In addition to damage caused by missiles or drones, logistics problems triggered by the closure of the Strait of Hormuz are having a material impact. Aluminium Bahrain (Alba) has implemented a controlled shutdown of reduction lines 1, 2 and 3, one example of how supply chain paralysis is spreading into industry.

  By idling 19% of its production capacity, approximately 308,000 tonnes a year, Alba is attempting to preserve raw material inventory and prioritise the operational stability of its newer, more efficient lines 4, 5 and 6. However, the macro implications for Manama are severe. Alba contributes 12% to Bahrain’s GDP, with the broader aluminium sector, a vital driver of the kingdom’s Economic Vision 2030, accounting for over 15%.

  The conflict is now the Gulf’s most consequential economic stress test in a generation

  Dubai disruption

  In Dubai, where the economy has made great strides in diversifying away from oil and gas and into sectors including tourism, aviation and real estate, the disruption caused by the war is also taking a toll. Despite a few high-profile attacks, the city’s infrastructure remains almost entirely intact. The problem is that its accessibility has been halved. As of late March, data shows flight capacity hovering at 50% across 70% of destinations. Hotels in the emirate are operating at single-digit occupancy levels.

  In response, Dubai has begun reviewing support packages for the sector, including fee relief and the removal of penalties for delayed payments. This stance mirrors Dubai’s response to the Covid-19 pandemic, a crisis the emirate ultimately navigated well. The plan is that an initial focus on resilient source markets, such as Russia and Africa, will allow the tourism sector to move onto the road to recovery.

  The Dubai property market is perhaps the most sensitive barometer of international confidence. For three weeks, the market has lived in a state of suspended animation. While AED11.9bn in real estate sales were recorded in early March, analysts warn of a significant time lag. These figures represent registrations of sales agreed weeks or months ago, and the true impact of the 28 February escalation may not be reflected in official data until late March or April.

  Early indicators from brokers and market analysts point to falling transaction volumes. The narrative of safety and guaranteed returns that fuelled the post-pandemic boom, and attracted billions in overseas wealth, has been dented. Investors are increasingly seeking reassurance that their capital is not anchored in a conflict zone.

  Rather than cutting headline prices, which would damage long-term community values, some developers are offering registration waivers, 0.5% monthly payment plans and extended grace periods.

  More than 15,000 flights were cancelled at seven major regional airports in the first week of March

  Aviation strain

  With airports in Bahrain, Riyadh, Kuwait, Dubai and Abu Dhabi all targeted during the conflict, the Middle East’s aviation sector is grappling with unprecedented operational friction. According to Fitch Ratings, more than 15,000 flights were cancelled at seven major regional airports in the first week of March alone.

  The main international hubs, Dubai, Abu Dhabi and Doha, are facing a sharp spike in operating costs. Rerouting around restricted airspace requires longer flight paths, additional technical stops and increased expenses for crew overtime. While carriers have buffers through fuel hedging, ranging from 50% to 80%, the sheer volume of refunds, vouchers, and accommodation for 1.5 million displaced passengers is weighing on balance sheets.

  The aviation insurance market is also shifting. With insurers holding the right to cancel war cover during active conflict, the risk profile of regional fleets is being repriced in real time. 

  If the conflict remains short-lived, the impact on annual profitability may be temporary. But a prolonged period of airspace instability would test the flexibility of the region’s transport infrastructure at a time when aviation is meant to be a central pillar of growth.

  Banking support

  Underpinning all sectors is the banking system, and the response from regional regulators has been swift. The Central Bank of the UAE (CBUAE) has approved a Financial Institution Resilience Package that aims to both reassure and protect the economy.

  The UAE’s banking sector entered the conflict from a position of strength, with foreign exchange reserves exceeding AED1tn ($272bn) and a capital adequacy ratio of 17%. By allowing banks to tap reserve balances up to 30%, and providing term liquidity facilities in both dirhams and dollars, the CBUAE is signalling that the system remains liquid, capitalised, and ready to support corporate and individual borrowers through temporary classification flexibility.

  The outlook across the GCC is not uniform. S&P Global Ratings has flagged Bahrain and Qatar as more exposed to potential capital outflows. In a severe stress scenario, the region could see domestic deposit outflows of up to $307bn. Bahrain’s retail banks are under scrutiny due to recent growth in external debt and thinner funding buffers.

  The risk of non-performing loans also looms. S&P suggests that, in a high-stress scenario, total losses across the GCC’s 45 largest banks could reach $37bn, with the logistics, tourism and real estate sectors bearing the brunt. The banking sector is the ultimate backstop. While it is well-placed to navigate the conflict, much will depend on how long the economic impact lasts.

  Brand challenge

  For decades, the GCC has positioned itself as a place where capital is safe, taxes are low and the lifestyle is aspirational. The conflict that began on 28 February has undermined that perception of safety. Restoring it will be the key challenge for the coming years.

  All is far from lost. The region’s military defences have performed well, and casualties have been kept to a minimum. There has been economic damage, especially to energy infrastructure and airports, but elsewhere cities across the region have continued to function, with residents leading mostly normal lives.

  The region will be hoping it can demonstrate that it remains functional and safe even during conflict. While many who remained in the region may concur with that sentiment, the more difficult task will be convincing the rest of the world. Adding to that problem is the likelihood that the regime in Tehran remains, leaving the lingering possibility of further strikes in the future.

  That possibility will be a hurdle for investment decisions to overcome. The test for the region’s leaders is no longer only about building the world’s tallest buildings or largest smelters. It is about proving they can protect them. 

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  Colin Foreman
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  Arada completes Sokoon buildings construction

  26 March 2026

  Sharjah-based private real estate developer Arada has announced the completion of five additional buildings in the Naseej District of its Aljada development.

  Kuwaiti firm Mohammad Abdulmohsen Al-Kharafi & Sons secured the construction contract for the Sokoon buildings in 2023, replacing Airolink Building Contracting as the project’s main contractor.

  The first four Sokoon buildings were completed in December 2023.

  In April last year, Arada also announced the completion of all eight Tiraz buildings in the Naseej District. The Tiraz buildings comprise 920 homes, including studios, one-bedroom and two-bedroom apartments.

  With the completion of the five Sokoon buildings, Aljada’s total number of completed residential units has risen to more than 8,200.

  Spanning 2.2 square kilometres, Aljada features residential districts, retail spaces, educational institutions, healthcare services and other facilities.

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  Yasir Iqbal
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  Local contractor wins Medina substation contract

  26 March 2026

  Danway Saudi Arabia has won a contract with National Grid SA to construct a new 110/13.8kV substation in Medina.

  The contract is valued at more than SR100m ($26.7m) and covers the construction of the King Abdulaziz Road substation, including design, engineering, supply, installation, testing and commissioning.

  The project is expected to take approximately 23 months to complete.

  Key components include 110kV gas-insulated switchgear (GIS), 50/67MVA 110/13.8kV power transformers and 13.8kV switchgear.

  National Grid SA is a wholly owned subsidiary of Saudi Energy, formerly Saudi Electricity Company. It owns and operates the kingdom’s high-voltage transmission network and is responsible for grid planning, interconnection and system reliability.

  The operator recently appointed another local firm, Nesma Infrastructure & Technology, as the contractor for the construction of two 380kV double-circuit overhead transmission lines in Riyadh, connecting an existing substation to a wind power substation, referred to as Samha Wind BSP.

  As MEED understands, National Grid SA is also due to begin construction on the replacement of 132kV oil-filled underground cable circuits between several substations in the Central Operation Area in Murabba in Riyadh.

  Riyadh-based Keir International is the engineering, procurement and construction contractor for the project.

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  Mark Dowdall
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  Neom terminates $5bn Trojena dams contract with Webuild

  26 March 2026

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  Neom has terminated its contract with Italian contractor Webuild for the construction of three dams feeding a freshwater lake, as well as ‘The Bow’ architectural structure at Trojena in northwest Saudi Arabia.

  In a statement posted on its website, Webuild said: “The termination will become effective on 29 March. As of that date, the works are approximately 30% complete, with a remaining project backlog for Webuild of approximately €2.8bn ($3.2bn).”

  Neom awarded Webuild a SR20bn ($5bn) contract to build the dams in late 2023, which MEED exclusively reported at the time.

  The termination is the latest in a series of high-profile contract cancellations by Neom in recent weeks. Earlier this week, Neom terminated its contract with Malaysian contractor Eversendai Corporation for the steel structural works on the Ski Village project in Trojena.

  In a statement published on its website, Eversendai said it had received an official notice that the termination would take effect from 26 March.

  In January this year, Saudi Arabia confirmed the postponement of the 2029 Asian Winter Games, which were scheduled to be held at Trojena. Trojena was chosen to host the event in October 2022.

  Neom has also cancelled contracts for the construction of the tunnel sections of The Line in northwest Saudi Arabia.

  In a stock exchange filing dated 13 March, South Korean contractor Hyundai E&C said Neom cancelled its contract on 29 December last year.

  Hyundai E&C was executing the drill-and-blast section of The Line’s tunnels in a joint venture with Greece’s Archirodon and South Korean counterpart Samsung C&T.

  These developments follow a wider strategic review of Neom last year, as Saudi Arabia reassesses priorities under its Vision 2030 programme.

  With tighter liquidity at the sovereign wealth fund level, resources are being redirected towards projects linked to the Fifa World Cup 2034, Expo 2030, and essential housing, healthcare and education initiatives.

  

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  Yasir Iqbal
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  Iraq gas field project disrupted by regional conflict

  26 March 2026

  

   

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  Progress on Iraq’s project to develop the strategically important Akkas gas field has been disrupted by security issues related to the US and Israel’s ongoing war with Iran, according to industry sources.

  Work activity at the project site has been significantly reduced due to security concerns, and the project is now expected to take longer to complete.

  Iraq held a ceremony in January this year to mark the restart of drilling operations at the site as part of the field development project.

  In July last year, Iraq’s Oil Ministry announced signing a contract with the US-based oil field services provider SLB to develop production at Iraq’s Akkas gas field.

  Under the terms of the deal, SLB will drill wells at the Akkas field, aiming to initially raise production to 100 million cubic feet a day (cf/d).

  Many of SLB’s non-Iraqi employees have now been evacuated from the country.

  Over the long term, Iraq is targeting gas production of 400 million cf/d from the field.

  The contract with SLB replaces a previous deal with Ukraine-based Ukrzemresurs, which has been terminated.

  It also covers the construction of surface infrastructure and pipelines to connect Akkas to central processing units.

  The gas produced at Akkas will be used to fuel the Anbar combined-cycle power plant, which is under construction by the Electricity Ministry.

  Akkas gas field development

  The Akkas gas field, located in Anbar province in western Iraq, has 5.6 trillion cubic feet of proven reserves. The field was discovered in 1992 and began production in 1993.

  Since then, Iraq’s plans to develop the Akkas gas field to its full potential have experienced several setbacks.

  In April last year, the Iraqi Oil Ministry signed an agreement with Ukrzemresurs to develop the field.

  At the time, the Oil Ministry said that the partners were aiming to produce 100 million cf/d in the first two years, as per the agreement, with output targeted to increase to 400 million cf/d within four years.

  Prior to Ukrzemresurs, South Korean company Kogas was responsible for developing the field.

  Rights to the field were originally awarded to a consortium of Kogas and Kazakhstan’s state-owned oil company KazMunaiGas (KMG) in the third licensing round, which was launched in October 2011.

  KMG pulled out, leaving Kogas as the sole investor and operator on new contract terms.

  When the deal with Ukrzemresurs was originally announced last year, it was negatively received by some Iraqi politicians, with the Oil and Gas Committee in Iraq’s parliament rejecting the contract signing.

  At the time, Ali Al-Mashkour, a member of the Oil and Gas Committee, told Iraq’s Shafaq News Agency: “This contract involves a great waste of Iraq’s wealth, and there will be a waste of Iraq’s oil, and this confirms that Iraq is once again failing to choose reputable companies to work with in the most important economic field in the country.”

  He added: “We will work to uncover and expose the suspicions in this contract during the next stage, especially since this contract was made by some representatives for specific interests, which we will reveal soon with evidence.”

  Plans to sign the contract to develop the Akkas gas field with a Ukrainian company were first announced by the Oil Ministry in September 2023, but Ukrzemresurs was not named at the time.

  Iraq’s government is trying to transform the country into a gas-exporting nation. Currently, Iraq is reliant on Iran for gas imports.

  Both Saudi Arabia and the US, which are looking to contain Iranian influence in the region, have been supporting Iraq in developing its non-associated gas fields as this will reduce Iraq’s economic reliance on Iran.

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  Wil Crisp