Bahrain has recorded its first quarterly contraction since Q1 2021 and its steepest decline since the fourth quarter of 2020, as the US-Iran conflict continues to disrupt oil output.  

The kingdom’s real GDP (gross domestic product) – a measure of economic output adjusted for price changes - slid 3.8% from January through March this year, ending a five-year run of quarterly year-on-year growth, according to a report issued by the Ministry of Finance and National Economy. 

The contraction was driven by a 37.2% dip in oil activity, driven by restrictions on maritime traffic through the Strait of Hormuz which affected export capacity, alongside scheduled maintenances, the ministry said. 
Non-oil real GDP grew 2.2% in the first quarter, with financial and insurance activities recording the highest growth rate among non-oil activities at 8.6%.

Nominal GDP contracted 2.7% year-on-year, caused by the 31.1% decline in oil activities, compared to a 1.9% increase in non-oil activities.  

“The national economy recorded strong performance in January and February 2026, before it was impacted in March 2026 due to the hostile Iranian aggression on the kingdom,” the ministry said in a statement issued Wednesday. 

The International Monetary Fund in April estimated the kingdom’s economy to contract by 0.5% this year against a 3.3% growth projection in its Regional Economic Outlook report last October. The fund expects the kingdom to grow 4.5% in 2027. 

Foreign direct investment grew 2.6% year-on-year, bring the total FDI stock to 17.6 billion Bahraini dinars. 

The kingdom ranked 1st globally in public-private partnerships, in the World Competitiveness Ranking 2026, published by the International Institute for Management Development (IMD). 

Saudi Arabia's construction sector has shifted from hiring at breakneck pace to single-digit workforce growth, as the kingdom recalibrates its giga-project ambitions and developers demand greater certainty before adding headcount.

The number of workers registered under construction activity reached 365,562 in the first quarter of 2026, up 6% year on year, according to Saudi Contractors Authority data. That marks a steep deceleration from growth of 32% in 2025 and 41% in 2024. Across all worker categories including engineers and technicians, growth slowed to 8% in the first quarter from close to 20% in each of the two prior years.

The slowdown in hiring reflects a fundamental shift in how Riyadh is funding construction. The Public Investment Fund's 2026-30 strategy drops explicit references to The Line and Trojena — Neom's flagship developments — and instead commits to expanding private sector participation. Budgets on some Neom projects have been cut by up to 60%, and PIF capital expenditure is expected to fall around 15% this year.

Experts say the days of assuming every giga-project will develop at maximum speed are over as the market becomes more selective. Despite the hiring slowdown, contract awards have accelerated. The Saudi Contractors Authority recorded $30 billion in construction contracts between January and July, up nearly 60% year on year, with Saudi awards more than quadrupling year on year in June alone.

Demand for workers has also broadened beyond the headline giga-project names. Experts say there is now much more attention going into Riyadh, housing, transport, utilities, energy, mixed-use development and major infrastructure, alongside increased private-sector participation.

Talent shortages persist despite the hiring slowdown, particularly for experienced mechanical, electrical and plumbing tradespeople, site supervisors and specialist quantity surveyors, according to Dubai-based cost consultancy Stonehaven. Projects that are proceeding are competing for the same finite pool of specialists — with Neom, Red Sea, Diriyah Gate and Qiddiya all drawing from the same talent base simultaneously.

Pay continues to rise even as headcount growth slows, though at a more modest pace than the broader economy. The General Authority for Statistics' employee compensation index for construction rose 6.5% year on year in June, trailing the 9% gain recorded across the whole economy.

Added to that mix is the regional conflict, which has reinforced existing caution without fundamentally altering hiring decisions. 

Egypt accounts for 48% of the outstanding African sukuk market, as countries adopt sukuk issuances as an alternate source of funds, according to Fitch Ratings. 

Outstanding African sukuk crossed $7 billion in August 2026, up about 16% year on year. But it made up less than 1% of global sukuk outstanding, due to structural constraints.  

Egypt issued its debut US dollar sovereign sukuk in 2023 and is subsequently emerging as a regular and substantial issuer of US dollar sukuk following regulatory reforms and deepening ties with the six-nation GCC, the credit agency added. 

The North African country also issued its first local currency sukuk in 2025, which spilled over in the first half of the current year.  

Nigeria accounted for slightly more than a quarter of African sukuk outstanding, followed by South Africa (15%) and Benin (7%). Around $1 billion of African sukuk were issued so far in 2026, mainly by Benin and Egypt, compared with $3.3 billion in full-year 2025, according to Fitch. 

The Nigerian government has been issuing naira sukuk since 2017 while its parliament approved a plan in October 2025 that allows the government to borrow up to $2.85 billion on international markets. 

The $1.6 trillion, underdeveloped African debt capital market remains dominated by bonds, mostly concentrated in South Africa (39%), Egypt (18%), and Nigeria (9%). 

“Enabling regulation for sukuk is lacking in most African countries, while domestic Islamic financial institutions - which are typically key sukuk investors and issuers - are either small or absent,” the study said. 

Sukuk can help to diversify funding sources and attract demand from GCC and African Islamic banks, Sharia-compliant investment funds, and multilateral institutions.

Fitch rated around $3.7 billion of African sukuk outstanding at the end of the first half of the year, all of which were speculative grade. No rated African sukuk has defaulted to date.

The UAE has suspended all trade, commercial exchanges and financial transactions with Iran until further notice, citing regional escalation that it says threatens peace and security, after Iranian ballistic missiles targeted maritime navigation in the region.

The Foreign Affairs Ministry announced the suspension following confirmation by the UAE Defence Ministry that two ballistic missiles launched from Iran were detected on Tuesday, both of which fell into the sea. It was the first Iranian strike on the Emirates since an attack on Fujairah port in early May.

The UAE has blamed Iran for targeting at least three Adnoc-linked vessels transiting the Strait of Hormuz since the start of last week, part of a broader pattern in which more than 15 vessels have been attacked since the war began. Iran's foreign ministry dismissed the accusations as "baseless."

The escalation has effectively buried hopes of a near-term diplomatic resolution. President Donald Trump confirmed on Tuesday there were "no talks or conversations going on, or scheduled, with the Islamic Republic of Iran," adding that a naval blockade remains in full force. Iran's Supreme National Security Council secretary Mohsen Rezaei said on social media that the gap between "America's inability to reopen the Strait of Hormuz and its claim to own it is greater than the 7,000-mile distance between Washington and the strait itself."

Oil prices rose for a fourth consecutive session on Wednesday on the back of the deteriorating outlook. Brent crude futures climbed 0.9% to $91.82 a barrel, while US West Texas Intermediate rose 1% to $85.75. Both benchmarks are up more than 5% over the past five days, reaching their highest levels since July 24.

Strait of Hormuz traffic remains severely constrained. Six vessels crossed on Tuesday, down from nine the previous day and below the 10-day daily average of 11. An interim peace deal signed on June 17 has failed to hold, and a separate navigation agreement reached between Iran and Oman this month has not been finalised.

Regional equity markets were largely steady. The Saudi benchmark closed flat, Dubai's index edged higher on the back of a near 2% rise in Emirates NBD, and Abu Dhabi's index gained 0.2%, its fifth consecutive session of gains, supported by Abu Dhabi Islamic Bank and telecoms group e&.

Construction has begun on a high-speed rail line linking Abu Dhabi and Dubai, with trains set to cover the route in 30 minutes at speeds of up to 320km/h when the project completes in 2031.

The 150km line, the UAE's first high-speed rail link, will include 97km of track, 11.2km of tunnels and four stations in the Abu Dhabi section.

It is being built by a consortium comprising Turkish firm Kalyon Construction, UAE-based National Projects and Construction, Trojan Tunneling and China State Construction Engineering Corporation.

The project is being developed by Etihad Rail, which is building a 900km passenger rail network across the UAE valued at $13 billion. Construction is proceeding on schedule, Kalyon said.

The new line will operate at more than 50% faster than existing UAE rail infrastructure, where trains currently run at around 200km/h. The Abu Dhabi-Dubai route will be the first in the country to reach 320km/h.

The announcement comes six weeks after the UAE launched its first intercity passenger rail service, which began operating between Fujairah and Abu Dhabi on June 30.