The Gulf Cooperation Council (GCC) projects market has demonstrated remarkable resilience, closing the first half of 2026 with stronger-than-expected performance despite regional geopolitical tensions, economic uncertainty, and rising construction costs.
According to MEED magazine, the value of new contracts awarded across the GCC reached nearly $140 billion during the first six months of 2026, marking an increase compared with the same period last year and coming close to the record levels achieved in 2024.
The performance highlights the strength of the region’s long-term development agenda, with governments continuing to advance major infrastructure, energy, transport, and urban development projects despite challenging market conditions.
Projects Show Remarkable Resilience
MEED reported that contract awards slowed between March and May following the outbreak of regional tensions but regained significant momentum in June. Only a limited number of projects were fully suspended, while most government-backed initiatives continued to move forward.
The magazine said sustained public spending on strategic projects has been a key factor supporting market activity, reinforcing investor and contractor confidence in the Gulf’s economic outlook.
The resilience of the projects sector reflects the GCC’s continued focus on diversification, infrastructure expansion, and reducing dependence on traditional economic drivers through ambitious development programs.
Rising Costs Replace Project Delays as Main Challenge
While project activity remains strong, MEED highlighted rising construction costs as the sector’s biggest challenge.
The magazine noted that building material prices across the Gulf have increased by between 4 and 7 percent, while aluminum prices have surged by 26 percent since December, and copper prices have climbed by 16 percent.
Contractors are also facing higher logistics expenses, with shipping companies imposing additional charges ranging between $1,800 and $4,000 per shipment arriving at Gulf ports.
Construction cost pressures are expected to continue, with Matthews, a real estate consultancy and project cost specialist, forecasting construction costs in the UAE could rise by 7 to 12 percent this year, while tender prices may increase by 6 to 9 percent.
Turner & Townsend expects construction cost inflation in the Middle East to reach 5.1 percent in 2027, driven by growing competition for contractors, specialized workers, and technical expertise due to the expansion of mega projects and data center developments.
Mega Projects to Drive Second-Half Growth
The GCC’s project pipeline remains extensive for the second half of 2026, with several major developments expected to maintain momentum across the region.
Among the anticipated projects is the awarding of the seventh phase of the Riyadh Metro project, valued at around $13.6 billion, along with major Dubai developments exceeding $10 billion, including the expansion of Al Maktoum International Airport and the strategic drainage tunnel program.
Other key projects expected to support regional activity include Kuwait’s Al-Khiran Independent Water and Power Project, the Riyadh-Qassim Independent Water Transmission Line, and the sixth passenger terminal at King Salman International Airport.
Gulf Development Story Remains Strong
MEED said the key question facing the Gulf projects market is no longer whether planned developments will proceed, but how much additional cost project owners will need to absorb amid inflationary pressures and market uncertainty.
The magazine noted that contractors are increasingly factoring higher input costs and risks into their bids, placing additional pressure on fixed-price contracts and potentially encouraging some clients to delay tendering until market conditions stabilize.
However, if the strong momentum recorded during the first half of the year continues, 2026 could emerge as one of the strongest years in GCC project market history, potentially rivaling the record performance of 2024.
