The UAE is still MENA’s safest infrastructure wager, but the war exposed the catch

The UAE remains MENA’s most attractive infrastructure market, even as the war forces a near-term reset in construction activity. BMI ranks the UAE first regionally and sixth globally in its Infrastructure Risk/Reward Index (pdf), with a score of 32.3. A lower score means a more attractive market.

But the safest market is still taking a hit: BMI expects UAE construction gross value added (GVA) to contract 6.8% in 2026, reversing last year’s 7.8% growth, before rebounding 7.4% in 2027 if trade and investment normalize.

Why the UAE still leads: The country’s appeal rests on deep financial markets, access to global supply chains, experienced contractors, and strong foreign investor participation. BMI’s ranking also reflects the UAE’s relatively low risk score compared with peers, including strong scores for country and industry risk.

The caveat? Hot money cuts both ways. BMI says the UAE saw the sharpest equity valuation pullback among GCC markets since the start of the conflict, reflecting its large base of mobile foreign capital and a sharper shift in risk perception than peers.

Yes, but: The UAE’s reliance on foreign capital is not a contradiction to its top ranking — it is part of the reason for it, BMI Head of Infrastructure Research Matteo Addonizio tells EnterpriseAM UAE. “The market’s attractiveness remains despite the challenges faced since the start of the conflict in February,” Addonizio says. But that view depends on a sustained recovery in Strait of Hormuz shipping and a calming of regional tensions, he adds.

If those pieces do not come together, the UAE’s private-investment appeal could weaken. “There are certainly risks to the market’s attractiveness for private investment in infrastructure over the medium term,” Addonizio says.

Hormuz is the whole story

The big unlock: “The key factor that we need to see is a sustained normalization of trade through the Strait of Hormuz,” Addonizio says. Imports matter for construction inputs, while oil and gas exports support government revenue and public spending capacity across the region.

BMI sees four channels hitting MENA construction — attack-related interruptions, supply-chain disruption, weakened public investment capacity, and weaker private-sector demand. The direct disruption has eased since the ceasefire, but supply-chain pressure is still feeding into shortages and input costs.

The materials bill is still working through: BMI expects construction input inflation to persist into 2H 2026, with concrete and steel especially sticky because of energy-intensive production and reliance on imported ores. That matters in the UAE, where a Currie & Brown study cited by Zawya warned that construction costs for data centers and hotels could rise by roughly 10%, driven by material-heavy MEP systems and a packed pipeline of data centers, hotels, gigaprojects, and airport expansions.

That pipeline? It comprises around 700 projects worth an estimated USD 138 bn, according to an Abu Dhabi Chamber of Commerce and Industry (ADCCI) report cited by Zawya. That means the UAE leads the GCC in confirmed construction demand. Saudi Arabia follows with 628 confirmed projects worth USD 168 bn.

But pipeline is not the same as momentum: The UAE remained the Gulf’s largest project market in 1Q, but awards still slowed after the war, with contracts falling to 16 in March from 52 in February, according to Meed Projects data seen by EnterpriseAM. Award values fell 26% m-o-m to USD 9.7 bn in March, while 1Q awards were down 18.5% y-o-y — a sign that the prospect set is still there, but execution is becoming more selective.

Contract stress is the next risk: Force majeure has not been widely invoked across construction yet, but BMI sees that risk rising as contractors come under pressure. EGA’s Al Taweelah shutdown after the strikes shows how disruption can test supply chains — It invoked force majeure on some contracts, but metal in transit and stockpiles kept many customers supplied.

Alternative routes only solve part of the problem: BMI’s report maps Gulf ports and road/rail links that can help reroute trade, but its conclusion is blunt: They cannot match Hormuz shipping capacity. That matters for the UAE, which is planning a new harbor near its eastern ports, new pipelines, and wider rail and road links to reduce reliance on the strait. The ambition may be “zero Hormuz dependency,” but BMI’s analysis suggests the nearer-term win is extra breathing room for energy exports, trade flows, and construction supply chains when regional risk flares up.

What gets delayed first?

Projects not yet on site: Infrastructure is built around long-term, multi-year commitments, which should limit immediate capital flight, Addonizio says. Still, he expects more caution toward large-scale projects through 3Q and potentially beyond, “in particular impacting projects which have yet to start construction.”

Delay risk is highest where Hormuz dependence is highest. “The risk of supply chain disruptions to projects is most pronounced in [...] markets such as Bahrain, Qatar, Kuwait, and to a lesser extent the UAE,” Addonizio says.

That matters because construction timeliness is already the region’s weakest industry-risk indicator, scoring 72.6 against the global benchmark of 50. The war is therefore worsening a risk that was already baked into the region’s infrastructure profile.

The regional picture: Bad year, better base case

The GCC contraction is uneven: BMI expects GCC construction GVA to contract 6.2% in 2026, down from 6.1% growth in 2025. Bahrain, Qatar, and Kuwait are forecast to see the steepest GCC contractions at 10.2%, 9.7%, and 7.6%, while the UAE is seen shrinking 6.8% and Saudi Arabia 4.7%. Oman is the outlier, with BMI forecasting a smaller 2.2% contraction due to fewer conflict-related disruptions and access to Gulf of Oman ports.

MENA construction GVA, meanwhile, could contract 3.3% in real terms in 2026, a sharp downgrade from its pre-war forecast of 3.2% growth. The region had grown an estimated 2.7% in 2025. The rebound would come as soon as next year though, with GVA expected to grow 5.1% in 2027, then average 3.1% annual growth between 2028 and 2030, assuming trade and investment normalize in 2H 2026.

Why the long-term story survives: Large infrastructure and building projects remain the region’s main support. Rail and power are expected to attract significant investment, while water infrastructure is becoming a strategic priority as shortages and damaged legacy systems drive demand.

The split is widening, though: BMI says MENA remains a high-risk, high-reward region, with the strongest prospects concentrated in GCC markets that have stronger state backing, deeper foreign participation, and better regulatory and contractual frameworks.

What to watch

The base case: A durable ceasefire and sustained reopening of Hormuz should improve sentiment toward MENA infrastructure and avoid permanent shifts in investment trends, Addonizio says. BMI expects GCC construction GVA to rebound 6% in 2027 on base effects and normalization.

But this is not a snapback story: Shipping will take months to normalize, input-cost inflation will lag, and private capital is likely to stay cautious on projects that have not yet broken ground.

The downside scenario: “If that agreement doesn’t come, if we continue to see disruptions to shipping in the Strait of Hormuz, then it is considerably more likely that we see a more cautious approach by private investment toward the region really take hold,” Addonizio says. That would carry “increasingly significant implications” for infrastructure development and construction activity over the coming years.

So the UAE story is pretty simple: It still has MENA’s best infrastructure risk-reward profile, the GCC’s largest confirmed project count, and the region’s strongest pull for foreign capital. But until Hormuz is properly back in business, even the safest construction market in the region is carrying a war premium.