Middle East Gulf offshore sector: resilience in the short term, structural risks on the horizon

Owners and operators seek options as secondary impacts from the Strait of Hormuz closure continue to ripple across Gulf energy markets and into Asia

London and Singapore, 3 June 2026. A combination of contract terminations, spiralling insurance costs and the threat to EPC projects are creating a complex combination of risk for offshore operators in the Middle East Gulf.

In its latest HORIZON Monthly Offshore report, MSI notes that, whilst contract terminations for rigs have been few, a return to pre-conflict levels could take months as fields are brought back onstream and construction projects get back up and running.

Despite the relatively short-lived nature of many drilling suspensions, a number of key operators within the GCC suspended or terminated some associated vessel contracts, this was seen across all three of the key countries of Saudi Arabia, the UAE and Qatar.

In Qatar, many contracts have either been suspended, with any downtime added on to the end of the contract, or terminated, whilst in the UAE up to 15 OSVs had contracts terminated.

The impact on the Saudi energy sector appears relatively contained compared with other Gulf markets, supported by the Kingdom’s ability to reroute exports through Red Sea infrastructure and existing pipeline networks.

“One hot topic for operators has been rising operating costs with insurance and crew costs inflating due to the conflict and a rise in war premiums seeing insurance increase up to 10 times over the last few weeks,” says MSI Associate Director Todd Jensen (pictured). “Owners have reported paying $80-100,000 for two weeks of insurance coverage, with a no claims bonus of up to 50% and many insurance policies also exclude any attempts at passage through the SoH, leading to no OSVs being able to pass in or out of the Middle East Gulf.”

A few owners have or are expecting newbuild vessels for delivery, which are currently unable to access the Middle East Gulf, this has led to these vessels waiting in the Gulf of Oman for the SoH to be reopened, whilst some owners look for opportunities in alternative markets, primarily India or Southeast Asia.

The closure of the SoH is also seen to be impacting the EPC and vessel maintenance markets, with structures and equipment constructed in Asia unable to enter the Middle East Gulf, thus causing construction projects to stall.

Equipment costs for vessel repairs have also seen a significant increase due to high production costs and scarcity within the Gulf, this has seen vessel maintenance costs increase within the region.