Gaza conflict puts region on edge again

26 December 2023

 

For much of 2023, the defining narrative for the Middle East was one of reconciliation. From Iran and Saudi Arabia agreeing to rekindle diplomatic relations under a China-brokered deal in March, and Syria’s President Bashar al-Assad being welcomed to an Arab League summit in Riyadh in May, leaders favoured diplomacy over division. 

Not all wounds healed, but even in Yemen an unofficial truce between Houthi rebels and Saudi-backed forces largely held throughout the year.

The Hamas assault on Israel on 7 October and Israel’s response dramatically altered the picture, although whether it will lead to lasting regional change remains to be seen.

Prior to the fighting, few minds in the region were focused on the Palestinian issue, with far more attention being paid to developing commercial and security ties. Saudi Arabia was widely thought to be edging closer to normalisation with Israel, with Israeli ministers starting to visit the kingdom regularly. 

Israel’s Communications Minister Shlomo Karhi was in Riyadh on 1 October for a conference. Tourism Minister Haim Katz visited for a World Tourism Organisation event a week earlier.

Such trips are now off the agenda, with Riyadh focused on leading the Islamic world in condemning Israel. On 11 November, it hosted a joint summit of the Arab League and the Organisation of Islamic Cooperation. Among the attendees was Iran’s President Ebrahim Raisi – the first visit by an Iranian president to Saudi Arabia since 2012. Raisi used the occasion to invite Crown Prince Mohammed bin Salman al-Saud to visit Tehran, a sign that the pre-war trend for reconciliatory diplomacy has not entirely disappeared. 

The Gaza conflict has been particularly difficult to navigate for Abraham Accord signatories Bahrain, Morocco and the UAE. Bahrain suspended economic ties with Israel, but there has been no sign from any of the three of wanting to break off relations altogether.

“How far the war goes will determine how the relationship [with Israel] develops,” said one analyst. 

Some other diplomatic gains are also being made against the backdrop of the war. Qatari Prime Minister Sheikh Mohammed bin Abdulrahman al-Thani travelled to Manama on 17 November as part of an energetic diplomatic push to bring the Israeli/Palestinian war to an end.

Sheikh Mohammed held talks with Prime Minister and Crown Prince Salman bin Hamad al-Khalifa, and they agreed to revive long-abandoned plans to build a ‘friendship bridge’ between the countries.

Navigating the multi-polar world will remain a key challenge for Gulf powers in the year ahead

Another trend evident in recent years has also continued – namely the efforts by some Gulf powers to dilute their ties with Western allies and build stronger links with China, Russia and others.

A clear sign of this came in August when the UAE and Saudi Arabia were invited to join the Brics grouping of major non-Western economies. They are set to formally join in January.

But in an indication of their desire to maintain links with all sides, Saudi Arabia and the UAE then signed up to the India-Middle East-Europe Economic Corridor (Imec) initiative at the G20 summit in New Delhi, India, in mid-September. 

Navigating the increasingly multi-polar world will remain a key challenge for Gulf powers in the year ahead.

Imminent peril

In other parts of the region, the situation holds more immediate peril. In Egypt, the economy is in a parlous state, with President Abdul Fattah al-Sisi relying on Gulf allies to prop up an economy facing over $29bn of debt repayments in 2024. 

Neighbouring Libya remains divided between rival administrations with their own regional allies. Turkiye and Qatar have supported the Tripoli-based government of Prime Minister Abdulhamid al-Dbeibah, while Egypt, Saudi Arabia and the UAE back General Khalifa Haftar and his Libyan National Army in the east. 

In Sudan, the UAE-backed Rapid Support Forces (RSF) have been fighting President General Abdel-Fattah Burhan’s Sudanese Armed Forces in a vicious civil war since April. Peace talks in Riyadh in late September failed to deliver a ceasefire, and the UAE has been implicated in the delivery of weapons to the RSF.

Tunisia is quieter, but the economy is in a delicate state and the lurch towards authoritarian dictatorship under President Kais Saied is making observers nervous.

Tensions between Algeria and Morocco are also problematic. The two countries have long been at odds over Western Sahara, but relations have become more strained in recent years, with Algiers severing diplomatic ties in 2021. Algerian coast guards killed two Moroccans in August 2023 when they strayed into Algerian waters on their jet skis – an incident that could have readily escalated. 

In Iraq, political disagreements came to the fore in November when the Supreme Court removed parliamentary speaker Mohammed al-Halbousi – the country’s most powerful Sunni politician – from office. Iran-backed Iraqi militias have also been flexing their muscle since the Gaza war, launching dozens of attacks on US forces in the country.

Other Iraqi court rulings have also caused disquiet, particularly a September decision by the Constitutional Court to annul a bilateral treaty on sharing the Khor Abdullah waterway with Kuwait. 

Iran meanwhile weathered the protests that erupted in the wake of Marsa Amini’s death in September 2022. Tehran’s emerging challenge is in managing the response of its regional allies to the Gaza conflict. The actions of its other allies
in the region – including the Houthis in Yemen and Hezbollah in Lebanon – could set the tone for the whole region in the year ahead.

Image: Smoke rises after Israeli air strikes on the city of Rafah in the southern Gaza Strip on 10 October 2023

https://image.digitalinsightresearch.in/uploads/NewsArticle/11342772/main.gif
Dominic Dudley
Related Articles
  • Neom’s industrial pivot gathers pace

    1 October 2026

    Commentary
    Colin Foreman
    Editor

    Reprioritisation has been the buzzword in Saudi Arabia over the past two years and nowhere has that been more evident than at Neom. 

    The slowdown of development at The Line and the postponement of the 2029 Asian Winter Games at Trojena have dominated international headlines. As these projects scale back, Oxagon’s industrial and logistics base has become the $500bn gigaproject’s flagship development. There are tangible results: in August, the $8.5bn Neom Green Hydrogen project was commissioned, marking Neom’s most significant completion to date. 

    Construction activity elsewhere at Oxagon supports this trend. The AI data-centre campus being developed by Humain and DataVolt has broken ground on its first 100MW phase, backed by $5bn of investment and targeted for service in 2028. Neom has issued an expression of interest for a rail line linking the Port of Neom to Saudi Arabia Railways’ North-South network, tenders are out for an industrial wastewater plant and the upgrade of Highway 55, and the port itself is advancing towards a 2030 capacity target of 1.5 million TEUs. 

    The regional conflict that began in February has strengthened the business case by giving Oxagon’s Red Sea port added strategic weight as a second maritime gateway outside the Strait of Hormuz, at a time when Riyadh has committed to directing about 80% of the Public Investment Fund’s portfolio into domestic investment.

    These developments reflect a kingdom recalibrating rather than retreating

    Elsewhere, Saudi Arabia’s wider projects market is holding steady despite conflict-related disruption, with contract awards reaching $68bn so far this year. The regional power market is also diversifying, with Aljomaih, EDF and Kepco all more than tripling net capacity in recent years as Acwa retains its lead.

    These developments reflect a kingdom recalibrating rather than retreating, with priority given to projects capable of delivering commercial returns.


    READ THE OCTOBER 2026 MEED BUSINESS REVIEW – click here to view PDF

    Industry and logistics drive development at Neom; Saudi Arabia’s investment priorities realign amid conflict; MEED’s 2026 power developer ranking.

    Distributed to senior decision-makers in the region and around the world, the October 2026 edition of MEED Business Review includes:

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/20178338/main.gif
    Colin Foreman
  • Contractor wins Dammam airport water infrastructure deal

    1 October 2026

    Saudi Arabia-based Alkhorayef Water & Power Technologies has won an SR80m ($21.3m) contract to rehabilitate water and wastewater infrastructure at King Fahd International airport in Dammam in the kingdom’s Eastern Province.

    The contract was awarded by Dammam Airports Company (DACO), and work is scheduled to be completed within 18 months, the firm said in a disclosure to the Saudi Exchange (Tadawul) on 29 September.

    The scope covers the design, construction, supply, installation, replacement, rehabilitation and integration of water and wastewater infrastructure.

    It includes pumps, storage tanks and reservoirs, reverse osmosis facilities, piping and tie-ins, as well as electrical and instrumentation works.

    The award comes as DACO advances a wider programme of investment at King Fahd International airport.

    DACO signed more than SR1.2bn ($320m) in agreements in June covering airport infrastructure, including a new power station, a medium-voltage distribution network and upgrades to the existing electrical grid. 

    In September, it also appointed WSP Middle East, the regional arm of Canadian engineering firm WSP, to develop the airport’s expansion under its masterplan.

    The expansion is intended to increase annual passenger capacity to more than 19.3 million by 2030, with a longer-term target of 32 million passengers. 

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20169118/main.jpg
    Mark Dowdall
  • Kuwait tenders LNG project

    1 October 2026

     

    State-owned Kuwait Integrated Petroleum Industries Company (Kipic) has tendered a project to develop a reliquefaction unit at the Al-Zour liquefied natural gas (LNG) import terminal.

    The project focuses on developing a boil-off gas (BOG) unit at the terminal, with bids due on 22 December.

    A meeting for contractors to discuss the project is scheduled for 18 October.

    The project scope includes engineering, procurement and construction works, along with pre-commissioning, commissioning and performance testing services.

    The list of prequalified companies is:

    • Fluor (US)
    • GS Engineering & Construction (South Korea)
    • Tecnicas Reunidas (Spain)
    • Larsen & Toubro (India)
    • Hyundai Engineering (South Korea)
    • CTCI Corporation (Taiwan)
    • Daewoo Engineering & Construction (South Korea)
    • Hyundai Engineering & Construction (South Korea)
    • Saipem (Italy)
    • Samsung Engineering (South Korea)
    • Sinopec Engineering (China)
    • JGC Holdings (Japan)
    • KBR (US)
    • China National Petroleum Corporation (China)
    • Technip (France)

    A BOG unit at an LNG facility captures, compresses and processes natural gas vapours that evaporate from cryogenic storage tanks, enabling the gas to be recycled back into the system rather than flared.

    In April, MEED revealed that contractors expected the project to be worth about $200m.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20168625/main2005.jpg
    Wil Crisp
  • Riyadh approaches contractors for 2km tower

    1 October 2026

     

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s Public Investment Fund (PIF) has reached out to contractors as part of a market-sounding exercise for the construction of the proposed 2-kilometre megatall tower project.

    MEED understands that a PIF subsidiary, the Tower District Real Estate Development Company, is undertaking the process.

    It is understood that several experienced international contractors, as well as some prominent local contractors, have been approached.

    The latest development follows PIF receiving offers in June last year from firms seeking a contract to provide project management consultancy (PMC) services for a new central business district (CBD) on the outskirts of Riyadh, which includes the proposed 2km tower.

    The PMC role covers both the tower and the surrounding district.

    Firms understood to have been invited to bid include US-based Aecom, Jacobs, Parsons and Turner, as well as the UK’s Mace.

    UK-based Foster & Partners is working as the architect for the tower after winning a design competition launched in late 2022.

    Record breaker

    The proposed tower would be more than double the height of the world’s tallest building, Dubai’s Burj Khalifa, which stands 828 metres tall. It is expected to be at least several hundred metres taller than the 1,000-metre-plus tower under construction in Jeddah.

    Contractors that have priced megatall towers in the region say a 2km-tall structure could cost about $5bn to construct, depending on the final design.

    The 2km tower and the surrounding CBD – known as Project Rise – sit within a larger masterplanned development to the north of Riyadh called the North Pole.


    MEED’s October 2026 report on Saudi Arabia includes:

    > COMMENT: Saudi projects hold steady
    > GOVERNMENT: Riyadh looks to reset its regional defence outlook
    > ECONOMY: Conflict bolsters case for Saudi economic diversification

    > BANKING: Saudi lenders readjust to lower lending and deposit climate
    > UPSTREAM: Aramco upstream spending gathers pace
    > DOWNSTREAM: Sabic steps up Saudi petchems investment

    > POWER: Saudi Arabia’s power award activity slows
    > WATER: Saudi water sector hits sharp slowdown
    > CONSTRUCTION: Saudi construction defies the headwinds
    > TRANSPORT: Saudi infrastructure pushes forward amid conflict
    > DATABANK: Saudi data indicates project spending shift

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/20156496/main.jpg
    Yasir Iqbal
  • Singapore’s Temasek plans Middle East expansion

    1 October 2026

    Singapore’s Temasek plans to open offices in Riyadh and Abu Dhabi early next year as it targets investment and partnership opportunities in Saudi Arabia, the UAE, Qatar and the wider region.

    The state-owned investor had a net portfolio value of S$518bn ($401bn) as of 31 March 2026.

    It said the new offices will serve as regional hubs for Temasek and its portfolio companies, with some businesses expected to co-locate to work more closely with partners and pursue deals alongside the group. The openings are subject to regulatory approvals.

    Temasek said it will also step up engagement with institutions in Qatar, although it has not announced plans to establish an office there.

    The company said the expansion reflects its confidence in the region’s long-term fundamentals and the economic transformation being driven by national diversification programmes.

    It added that a presence in Riyadh and Abu Dhabi will also support investment activity beyond the region by improving access to opportunities across the wider Middle East, Central Asia and Africa.

    Several Temasek-owned or Temasek-backed companies are already active in the GCC, providing a platform for the group’s planned expansion.

    These include Singapore-headquartered engineering and consultancy firm Surbana Jurong, which has been involved in masterplanning and advisory work on major regional developments, alongside other portfolio companies with interests spanning infrastructure, logistics, financial services and technology.

    According to data from regional project tracker MEED Projects, Surbana Jurong is involved in several major projects in Saudi Arabia, including King Abdulaziz International airport (KAIA) in Jeddah, Jeddah Islamic Port, Red Sea Global’s Amaala masterplan, the Trojena dams scheme, Oxagon, King Salman International airport and Saudi Arabia Railway’s North-South Phosphate Railway 3.

    The firm has also worked on projects in the wider region, including the West Link project, Urban Loop, Musaffah Innovation District masterplan, Etihad Rail’s high-speed rail programme and Abu Dhabi airport’s Midfield Terminal.

    Surbana Jurong has also secured masterplanning contracts from Abu Dhabi’s Department of Municipalities & Transport and Abu Dhabi Ports.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20157511/main.jpg
    Yasir Iqbal