Saudi Arabia’s GDP posts sharpest decline since COVID-19 pandemic

Saudi Arabia’s economy contracted by 4.8% year-on-year between April and June amid the US-Iran conflict, marking the kingdom’s steepest quarterly decline since the COVID-19 pandemic, Bloomberg reports.

According to the agency, the second-quarter downturn was driven by disruptions to oil exports caused by blockages in the Strait of Hormuz. Saudi Arabia’s oil sector contracted by 24.7%, compared with 2.9% growth in the first quarter. The country’s oil production also declined and remains below pre-conflict levels.

The International Monetary Fund (IMF) forecasts Saudi Arabia’s economic growth will slow to 1.7% in 2026. Growth is expected to accelerate to 5.5% in 2027, supported by the government’s economic diversification projects.

Following the outbreak of war between the United States and Israel and Iran on February 28, Iranian authorities closed the Strait of Hormuz to vessels linked to the United States, Israel, or countries that supported military action against the Islamic Republic. The strategic waterway carries roughly 25% of global seaborne oil trade.

In June, Washington and Tehran signed a memorandum of understanding providing for an immediate ceasefire on all fronts. Saudi oil exports through the Strait of Hormuz subsequently resumed, but have since faced renewed security risks following violations of the truce by the parties.

By Jeyhun Aghazada