This region will see 2.5% to 3.4% GDP growth in the 4th quarter of 2026.
Middle East construction challenges in 2026 include the ongoing Iran conflicts, increased material costs, inflation spikes, supply-chain issues, and shortages of skilled workers.
Saudi Arabia is experiencing a number of serious challenges at this time. Attacks on oil-related production facilities and major cross-country pipelines have caused serious damage, resulting in oil facilities and pipelines being taken offline. This situation could last for a number of weeks. In addition, the shipping route in the Red Sea is under siege / attack by Iran-backed Houthi rebel forces.
The U.S. bombing of Iran’s nuclear production facilities and Iran’s future response are still TBD. This could impact the Middle East region’s construction industry. Construction costs and the material supply chain could be affected. Stay tuned. The big wildcard in the Middle East is Iran and what course the Iranian government takes in the next two to three months.
Qatar, UAE, Saudi Arabia, Oman, Jordan, Bahrain, Kuwait, Iraq, and Israel have suffered numerous drone / missile attacks. Iran was targeting U.S. military bases; many drones missed their targets and hit various industrial, petrochemical, and port-type facilities.
The conflict involving Iran and its allies and the USA has harshly affected the MiddleEastern region, damaged industrial complexes and commercial facilities, and caused billions of dollars in damage, together with a huge reduction in oil and gas exports.
To get around this Iran drone / missile problem in the future, Saudi Arabia, UAE, Iraq, and Kuwait are debottlenecking or constructing new overland pipelines to escape the reach of Iran. These projects are estimated to cost between $3 billion and $5 billion.
Saudi Arabia’s Vision 2030 continues on its relentless journey as we move further into 2026, with as much as $20 billion to $30 billion poised to be spent on future construction projects in 2026. However, some major capital projects, such as NEOM (the new futuristic city), have been reduced in scope in recent months.
Saudi Arabia construction costs are currently projected to increase by 3.7% to 4.7% in the 4th quarter of 2026.
However, the region does include countries such as Jordan, Oman, Iraq, Libya, Algeria, and Egypt that will experience minimal / subdued growth in the 4th quarter of 2026.
Israel continues to develop its life sciences, AI, and military technology. Unfortunately, the Middle East region is still suffering from ongoing unrest and the new challenges from Iran.
The main issue is how long the Iran conflict will last, whether it will drive up Gulf States inflation in the next three to six months, and whether it will cause some construction projects to be canceled.
If and when a settlement is reached with Iran, repairs to oil and gas and other infrastructure facilities could be significant and keep many EPC companies busy for many years.
