Most rigs in the Arabian Gulf remain operational despite the renewed hostilities that culminated in a drone strike on a jack-up in Kuwaiti waters on 12 July, injuring one crew member. Teresa Wilkie, director of RigLogix at Westwood Global Energy Group, told Offshore Support Journal the attack "has once again cast a shadow over the region", but said the impact on offshore drilling has so far been limited.

The jack-up market was thrown into turmoil in the early months of 2026, when the escalating conflict triggered mass evacuations — particularly offshore Qatar — widespread rig down-manning, contract terminations, Saudi Arabian rig suspensions, and delays to both tenders and planned drilling campaigns.

"But by the second quarter, the outlook had begun to brighten," Ms Wilkie explained. Ceasefire talks gathered momentum, raising hopes of a broader agreement to ease tensions between the US and Iran. Most jack-ups offshore Qatar returned to work, several suspended Saudi Aramco rigs resumed operations, and market activity began to recover. A major multi-rig tender moved closer to award, while several operators launched new tendering initiatives — tangible signs that confidence was returning.

"That optimism has since been shaken," said Ms Wilkie, pointing to the collapse of diplomatic efforts and renewed hostilities. Discussions continue regarding the reactivation of additional suspended Saudi Aramco units. Challenges surrounding vessel movements through the Strait of Hormuz, heightened security concerns and the threat of further attacks on energy infrastructure are weighing on sentiment.

"The Arabian Gulf market remains far more resilient than in previous downturns," said Ms Wilkie. "Utilisation remains high by global standards, fleet commitment levels are strong, and national oil companies continue to pursue ambitious production and gas growth targets."

She said contractors show little indication of preparing to withdraw rigs, and operators are not abandoning offshore developments. "Activity appears to be slowing rather than stopping, with decisions deferred rather than cancelled."

The key question for the remainder of 2026 is whether the latest escalation proves short-lived or marks the start of a more prolonged period of instability. If tensions ease, tender awards, drilling programmes and suspended rig reactivations could quickly regain momentum. If not, the market may face renewed suspensions, project delays and downward pressure on utilisation. "For now, the recovery story remains intact," Ms Wilkie said.

OSVs: Qatar bears the brunt

Jesper Skjong, senior analyst at Fearnley Offshore Supply, told OSJ that OSV activity across the Gulf Cooperation Council states softened following conflict-linked disruptions. In Qatar, force majeure declarations, damage to the Ras Laffan LNG facility and project delays led to contract terminations. "Rig demand declined, and there was a reduction in offshore activity, Qatar being the most affected market, with operators scaling back vessel and rig requirements and several projects being deferred," he said.

"But elsewhere, market conditions remain relatively stable. ADNOC continues to maintain its contracted fleet in the UAE, and Saudi Arabia has seen limited cancellations or day rate adjustments. However, operators across the region are increasingly seeking rate reductions, and owners face higher operating and insurance costs and are resisting significant concessions."

New long-term contract awards remain limited, utilisation has been hit by unexercised extension options, and recent tensions may delay full market normalisation, Mr Skjong said. Longer-term fundamentals remain constructive, supported by planned capacity expansions and ongoing offshore development projects.

Todd Jensen, senior analyst at Maritime Strategies International, said AHTS utilisation across the fleet has held steady at about 70%, with PSV utilisation around the mid-50% level. Vessel movements declined in every affected country except the UAE, which gained 30 AHTS and nine PSVs — likely vessels heading there for maintenance, servicing or mooring during the disruption. Qatar's fleet fell from 74 AHTS and 40 PSVs to 63 AHTS and 33 PSVs, a combined decline of 18 vessels, all of which went to the UAE for maintenance, repairs or warm stacking. Qatar's utilisation therefore remains strong only because vessels have left the country.

Prices and pipeline workarounds

Oil prices have been extremely volatile since the conflict began, but have not risen to the degree some feared. Brent came close to $140/bbl in April before retreating to a $100-120 range through May, fluctuating with peace-negotiation headlines. As of 21 July 2026, Brent sits at just over $89/bbl following the failed ceasefire between Iran and the US.

MSI expects an annual average close to $92/bbl for 2026 — below the near-$100/bbl average recorded in 2022 — assuming a substantial decline from Q2 levels through the second half of the year as the Hormuz situation improves. "The latest waves of attacks add more uncertainty as to when an agreement will be made and indeed whether Iran, the US and Israel can come to an agreement that all parties find acceptable," Mr Jensen said.

Countries are moving to secure export routes that bypass the Strait of Hormuz. The UAE plans to fast-track a new "East-West Pipeline" project, lifting capacity via Fujairah Port from 1.8 Mn b/d to around 3.3 Mn b/d, operational in 2027. Saudi Arabia plans to expand its East-West pipeline by 1-2 Mn b/d, to roughly 9 Mn b/d.

Under MSI's annualised production assumption, the Middle East loses close to 6 Mn b/d of output in 2026 — production that cannot be re-routed — with almost all regained in 2027. Middle Eastern LNG exports have fallen 93% since January, dropping from 8.15 MnTpa to 0.58 MnTpa.

The watch item: whether the 12 July escalation proves short-lived, and whether tender awards, Saudi rig reactivations and the UAE's Fujairah pipeline timeline hold to schedule.