Gulf Projects Under Pressure: What Contractors and Project Teams Need to Consider Right Now

1. The Situation on the Ground

Since late February 2026, the conflict between the US, Israel and Iran has moved well beyond rhetoric. Military strikes, retaliatory operations, and threats to commercial shipping have turned the Strait of Hormuz into a near no-go zone for vessel traffic. By early March, vessel movement through Hormuz had dropped by around 70%. Approximately 170 container ships and a large number of tankers were stuck inside the Gulf with no safe exit. The IEA responded with a record emergency release of around 400 million barrels from strategic reserves. Ports including Fujairah were congested. Freight rates and insurance premiums moved sharply.

Around a fifth of the world’s oil and gas supply passes through Hormuz. So does roughly 70% of all GCC food imports. As we write this, most construction sites across the GCC are still operating; according to MEED, out of over 6,700 active projects tracked in the region, only a small number have been formally suspended. That is broadly encouraging, but it does not tell the whole story.

A project does not need to stop to be in serious trouble. Delayed materials, disrupted logistics, and rising costs can quietly erode programmes and inflate budgets over weeks and months, often without anyone issuing a single formal instruction. The question for every project team right now is not just whether the site is running, it is whether the project is being managed in a way that protects entitlement when the time comes to make a claim.

2. How This Is Affecting Projects in Practice

The most direct impact is on supply chains. Large EPC and infrastructure projects, power plants, desalination facilities, refineries, transport schemes, typically rely on imported equipment and materials that move by sea. With commercial carriers suspending Hormuz transits and ports backing up, delivery schedules are slipping. For projects with tight critical paths and long lead-time items, missing a key delivery window on a major plant component can push a project back by months and trigger knock-on delays across other work packages.

Beyond supply chains, other pressures are building. War risk and political risk premiums on marine cargo have risen, and some coverage has narrowed. Security costs at certain sites have gone up. Where the conflict has restricted personnel movement or prompted voluntary evacuation decisions, workforce continuity is also an issue.

There is also a less visible but real layer of disruption from management attention. Project teams are spending time on logistics firefighting, supplier communications, and lender reporting they would not otherwise be spending. That cost does not always show up in a budget line, but it is real and should be tracked. If upstream energy infrastructure is disrupted for a sustained period, that can affect the utilities that projects under construction depend on. It is not an immediate risk for most sites, but it is part of the picture.

3. What the Contracts Say

Most major construction and energy contracts used across the Gulf include provisions that are capable of addressing situations like war, hostilities, and events outside either party’s control. Whether those provisions actually deliver relief in a given case depends on the specific contract wording, the governing law, and whether the right procedural steps have been followed. There is no one-size-fits-all answer, and each project needs to be assessed on its own terms.

3.1. FIDIC Contracts

FIDIC forms, particularly the Yellow and Silver Books, are the standard vehicle for EPC and infrastructure projects across the GCC. The 1999 suite addresses force majeure under Sub-Clause 19; the 2017 suite uses the term ‘Exceptional Events’ under Sub-Clause 18. The core idea is the same: if an event beyond either party’s control, including war and hostilities, whether declared or not, prevents performance, the contractor may be entitled to relief.

That relief is primarily an Extension of Time. Cost recovery is not automatic, it depends on the specific contract wording, and on most Gulf megaprojects FIDIC has been amended, sometimes significantly.

The FIDIC notice process is two-stage, and both stages matter. Under the 1999 suite, the contractor must first give a notice of claim under Clause 20.1 describing the circumstances within 28 days of becoming aware of the event. This does not need to quantify the claim, it simply needs to identify the event and flag that a claim is coming. The second stage is the fully detailed claim, which must follow within 42 days of the event and set out the contractual basis, the delay analysis, and the supporting cost evidence. The force majeure sub-clause (19.2) also specifically requires notice within 14 days of the force majeure event occurring. Both notice obligations sit alongside each other, and compliance with both is important. Under the 2017 suite, a similar two-stage structure applies under Sub-Clause 20.2.

Failing to give the initial event notice within the required period creates a serious risk that entitlement to EOT and additional payment may be lost entirely. The contract language in the 1999 suite is stark on this point. How strictly this operates in practice can depend on the governing law and on whether prejudice to the employer can be shown. Civil law jurisdictions, including the UAE, have sometimes shown more flexibility on strict procedural bars than common law courts, but best practice is always to treat the notice deadline as a hard deadline.

If the disruption continues long enough, 84 continuous days or more than 140 days in aggregate, both parties acquire rights to terminate, with the contractor entitled to be paid for work completed and reasonable demobilisation costs. We are not at that point for most projects, but it is worth knowing where the threshold sits.

3.2. Civil Law: The UAE, Saudi Arabia and Qatar

3.2.1.UAE Civil Law

In the UAE, Article 273 of the Civil Code deals with force majeure in the strict sense: if performance becomes genuinely impossible because of an external, unforeseeable event, the obligation is extinguished and the contract can be terminated. The threshold is high, the event must make performance objectively impossible, not just more difficult or expensive. For most active projects where works continue, this threshold will not be met.

Article 249 is potentially more relevant in the current environment. It applies where exceptional public circumstances make performance so burdensome that it would be seriously inequitable to hold the party to the original terms. In those cases, a court can reduce or adjust the obligation to restore balance. For projects still running but facing significantly higher costs and more difficult conditions than anyone anticipated at contract award, Article 249 may open the door to contractual rebalancing rather than outright discharge.

3.2.2. Saudi Arabia: A Distinct Framework

Saudi Arabia’s legal framework is genuinely different from the UAE and Qatar, and that difference matters in practice. Historically, Saudi contract law was governed by Sharia-based principles rather than a codified civil code. In 2023, Saudi Arabia enacted the Civil Transactions Law (CTL, Royal Decree M/191), which came into force in December 2023, as the Kingdom’s first codified civil law. The CTL puts force majeure on a statutory footing: if performance becomes impossible for reasons beyond a party’s control, the obligation can be cancelled and the contract rescinded.

Critically, Article 97 of the CTL introduces a mandatory hardship provision that cannot be contracted out of: where extraordinary, unforeseeable events make performance excessively onerous and threaten the party with heavy loss, the affected party must first invite the other side to renegotiate. If no agreement is reached within a reasonable period, the court may step in and reduce the onerous obligation to a reasonable level. For contractors and employers on Saudi projects, this means the process has a specific sequence that must be followed: renegotiation first, then court.

3.2.3. Qatar

Qatar’s Civil Code similarly distinguishes force majeure from hardship through Articles 171(2), 187 and 188. Force majeure can suspend obligations during a period of impossibility and, where performance becomes definitively impossible, extinguish the obligation or permit termination. Article 171(2) addresses exceptional and unforeseeable events of a general character that make performance excessively onerous and threaten the obligor with exorbitant loss; in those cases, a court can reduce or adjust the obligation to a reasonable level to restore balance, reflecting a hardship mechanism that is generally treated as mandatory and cannot be excluded by contract. The distinction between impossibility and excessive hardship runs through Qatari law in the same way as under the UAE Civil Code, though the specific articles and procedural routes are different.

3.3. English Law and DIFC Law

A significant number of Gulf project contracts, particularly those involving international contractors, energy companies, or project finance, are governed by English law or DIFC law. These two systems are related but meaningfully different.

Under English law, there is no statutory concept of force majeure. Relief depends generally on what the contract says. If the contract includes a force majeure clause, it is usually interpreted narrowly, and courts often enforce procedural requirements strictly. The principal fallback is the doctrine of frustration, which applies where an unforeseen event has made performance radically different from what was agreed, a high threshold that is rarely available in construction projects that already have detailed force majeure regimes.

The position under DIFC law is different and should not be treated as identical to English law. The DIFC Contract Law (Law No. 6 of 2004) contains a statutory force majeure provision at Article 82, which applies to all contracts governed by DIFC law regardless of whether the contract contains an express force majeure clause. Under Article 82(1), non-performance is excused where the affected party proves that it was due to an impediment beyond its control that it could not reasonably have been expected to take into account or to have avoided or overcome. Importantly, Article 82 does not excuse payment obligations.

In practice, most DIFC-governed construction and energy contracts also include bespoke force majeure clauses that sit alongside Article 82. In practice, parties need to comply with the notice requirements under both the contractual clause and Article 82, to the extent that both apply. Article 82 requires notice within a reasonable time of the impediment becoming known; failure to give that notice makes the party liable for damages resulting from non-receipt. As with English law, DIFC courts and tribunals have shown themselves willing to enforce notice obligations rigorously. The practical message remains the same: issue notices early and keep them updated.

4. Where Expert Advisors Add Value

Managing a conflict-related claim on a large infrastructure or energy project requires forensic scheduling, quantum analysis, contractual knowledge, and dispute experience that most project teams do not have fully in-house, nor should they need to. This is what we do.

On delay, we apply recognised forensic scheduling methodologies to the actual project programme, identifying the critical path before and during the disruption and tracing the effect of specific events onto specific activities. On quantum, we go through cost records systematically, isolate what is attributable to the conflict, and build a claim that is commercially defensible, including addressing commodity price escalation, which is clearly a factor in current energy and freight markets.

In arbitration expert evidence on delay and quantum is regularly the deciding factor. Advisors who have been involved from the start of the disruption are almost always more effective than those brought in at the last minute. Beyond formal disputes, we help clients understand claims exposure across a portfolio of projects, advise on how to structure submissions, and support commercial conversations aimed at resolving issues before they become full arbitrations. Early and well-structured engagement prevents more disputes than it creates.

A Few Closing Thoughts

We are living and working through a period of real uncertainty and we are not going to pretend otherwise. But uncertainty is not the same as paralysis. The contractors and project owners who come through this period in good shape will be those who stay focused on the things they can control: the notices they send, the records they keep, the programmes they maintain, and the people they bring in to help them navigate what they cannot control. That is not a complicated idea but in our experience, it is the one that separates those who recover their losses from those who absorb them.

We are available to discuss any of the issues raised in this note, feel free to reach out.