Saudi Arabia's Economy Shrinks 4.8% As Oil Industry Feels Impact Of Ongoing US-Iran Conflict
Saudi Arabia's Economy Shrinks 4.8% As Oil Industry Feels Impact Of Ongoing US-Iran Conflict Published By, Last Updated: July 30, 2026, 17:48 IST Iran and
Saudi Arabia's Economy Shrinks 4.8% As Oil Industry Feels Impact Of Ongoing US-Iran Conflict Published By, Last Updated: July 30, 2026, 17:48 IST Iran and groups aligned with Tehran have carried out attacks targeting US allies in the region, including Saudi energy facilities. 3D-printed oil pump jacks and a Saudi Arabian flag appear in this illustration (Reuters image) Saudi Arabia’s economy slowed sharply in the second quarter of 2026, recording its biggest year-on-year decline since the Covid-19 pandemic. Fresh government data released on Thursday showed that weaker oil production and continued regional tensions significantly weighed on economic activity. Preliminary estimates from the General Authority for Statistics showed the kingdom’s gross domestic product (GDP) fell 4.8 per cent between April and June compared with the same period last year. In contrast, the economy had expanded by 3 per cent in the first quarter, highlighting a sharp turnaround within three months. The latest figures indicate that the energy sector remained the biggest drag on growth. Economic output from oil-related activities dropped 24.7 per cent during the quarter, reversing the modest growth recorded at the start of the year, according to a report by Bloomberg. Regional Conflict Continues To Pressure Economy Economists say the prolonged military conflict involving the United States, Israel and Iran has disrupted trade routes and energy exports across the Gulf, creating fresh challenges for Saudi Arabia despite its strong oil infrastructure.
Iran and groups aligned with Tehran have carried out attacks targeting US allies in the region, including Saudi energy facilities. At the same time, the disruption of shipping through the Strait of Hormuz forced Saudi Arabia to rely more heavily on its pipeline network connecting oil fields to Yanbu on the Red Sea. Even that export route has remained vulnerable because of attacks linked to Iran-backed Houthi rebels operating from Yemen. Bloomberg Economics Chief Emerging Markets Economist Ziad Daoud said the conflict is placing pressure on both Saudi Arabia’s oil production and the wider economy. He said improvements in shipping through the Strait of Hormuz could support economic recovery, but warned that renewed military escalation or further attacks by Houthi rebels and Iraqi militias would increase downside risks. Non-Oil Growth Also Slows Saudi Arabia’s long-term strategy to reduce dependence on oil also lost momentum during the quarter. Non-oil sectors expanded by only 0.6 per cent after growing 2.9 per cent in the previous quarter, suggesting that weaker business activity has spread beyond the energy industry. Although international crude prices climbed above 90 dollars per barrel, Saudi oil production has not yet returned to levels seen before the conflict intensified. The kingdom also stepped up its own military response this week by carrying out strikes against Iran-backed militias in Iraq, reflecting the increasingly volatile regional security environment.
The BriefWire