Project awards in the Gulf slow in the wake of the war

The regional war has led to a slowdown — but not a halt — in project awards in the UAE, with the number of contracts falling to 16 in March, down from 52 in February, according to Meed Projects data seen by EnterpriseAM. The value of contracts awarded also fell 26% m-o-m to USD 9.7 bn during the month, while project awards fell 18.5% y-o-y for the entire 1Q 2026 to USD 29.2 bn.

The UAE was not alone: Saudi Arabia saw project awards halve during the quarter to USD 11 bn — its second-lowest level in more than five years, according to Meed data cited by Kamco Invest (pdf). The decline in awards in the UAE and Saudi Arabia — the Gulf’s two largest project markets — led to a 9.7% y-o-y decline in regional awards during the quarter, which was offset by growth in awards in Kuwait, Oman, and Qatar.

IN CONTEXT- The regional war has dampened foreign investor sentiment and caused disruptions at several major energy and industrial facilities across the Gulf. Foreign investors pulled some USD 120 bn from the UAE earlier in the conflict, and some major firms have paused plans to invest further in projects, including London-based data center firm Pure Data Centers. CEO Gary Wojtaszek told CNBC recently that the firm is pausing data center investment decisions in the region due to the war until “everything settles down,” adding, “no one’s going to run into a burning building, so to speak.”

BACKGROUND- The company’s data center on Abu Dhabi’s Yas Island was among several hit by debris from an Iranian strike earlier in the conflict. Still, he says the firm sees long-term prospects in the region, with strong demand and ambitious national visions.

The Gulf is now also facing a whopping USD 58 bn repair bill for existing energy infrastructure, as well as rising raw material costs, which means a recalibration of project funding is not out of the question.

This comes as some USD 86.7 bn worth of projects remain in the bid evaluation stage, and USD 52 bn are in tendering. That’s out of an estimated USD 550 bn worth of projects in the pipeline, mostly in construction and transport.

By the sector

The UAE maintained its position as the largest projects market in the region, and saw growth in project awards in two sectors, namely gas and transport. Transport accounted for more than a third of projects awarded during the quarter, at around USD 10.1 bn, up significantly from USD 3 bn in 1Q 2025. Meanwhile, the gas sector saw USD 8.5 bn in contracts awarded, up from USD 2.9 bn in the same quarter last year.

The sectors that got hit the hardest: Power, recording a 95.8% y-o-y fall in contracts awarded to USD 333 mn in 1Q 2026, and construction, which saw awards fall 39.9% y-o-y to USD 7 bn.

REMEMBER- Construction is among the sectors likely to see a slowdown due to the war’s impact on real estate demand. Fitch Ratings expects developers to prioritize cashflow over major expansions to navigate a cooling buyer sentiment.

What’s next? Expect a sluggish year for new projects

“GCC project activity is anticipated to witness sluggish momentum in 2026, weighed down by the destabilizing repercussions of the US-Iran conflict for the region as well as for the global economy,” according to Kamco Invest.

Activity is expected to rebound quickly in 2027, though, according to Kamco Invest, in line with the expected rebound in economic activity. Remember: Most economists see the UAE’s economy stagnating this year, but growth is expected to rebound near the 5-6% mark.

There are already some positive signs for 2Q 2026, at least. The UAE kicked off the quarter with several major contracts awarded, including AED 3.5 bn worth of contracts for Palm Jebel Ali. A new AED 34 bn Metro Gold Line is also set to start construction right away, with completion expected in 2029, so more news could be coming on that front.