Constituents of syngas, such as water, carbon monoxide and sulfides, can cause the degradation of the steel pipes they move through, leading to carbon dusting and corrosion. In spite of considerable attention to this process, many questions remain about its origin. We conduct reactive molecular dynamics simulations of multi-grain iron systems exposed to carburizing gas mixtures to investigate the effect of water content on metal dusting corrosion. To simulate carbon monoxide (CO) dissociation followed by carbon diffusion, we employ an extended-ReaxFF potential that allows accounting for both the high C atoms coordination in bulk iron as well as the lower C coordination at the iron surface and interfaces. The reactions happening in the sample at different water concentrations and at different time frames are explored. We demonstrate that the presence of water on a clean Fe surface promotes different catalytic reactions at the beginning of the simulations that boost the C, H, O diffusion into the sample. At later stage, the formation of oxide scale leads to an elevated concentration of H2O/OH molecules on the surface due to the decrease in Fe affinity to dissociate water. This results into blocking the Fe catalytic sites leading to lower C and O diffusion to the bulk of the sample.