Saudi Arabia GDP Drops 4.8% Amid U.S.-Iran War

The economy of Saudi Arabia contracted by 4.8% year-on-year in the second quarter of 2026, marking the sharpest decline since the COVID-19 pandemic. According to the General Authority for Statistics, the slump was primarily driven by a 24.7% plunge in oil activity, which subtracted 5.4 percentage points from overall growth. This follows a 3% growth rate recorded in the first quarter.

The downturn stems from a five-month war involving the United States, Israel, and Iran. This conflict led to the near-total closure of the Strait of Hormuz and retaliatory Iranian strikes against Saudi energy infrastructure. To mitigate these disruptions, the Saudi government rerouted over 70% of its crude exports to the Red Sea port of Yanbu. However, these efforts were further hindered by Houthi rebel blockades and attacks in the Bab el-Mandeb Strait.

Despite the volatility, non-oil and government activities showed marginal growth between 0.6% and 0.9%. The International Monetary Fund reports that the kingdom remains resilient due to strong fiscal reserves. While the IMF projects 2026 growth will slow to 1.7%, it anticipates a recovery to 5.5% growth in 2027 once maritime traffic through the Strait of Hormuz returns to normal.