Saudi Arabia's GDP shrank for a second straight quarter as the war involving Iran and fighting with Yemen's Houthi rebels disrupted oil output and exports. Non-oil activity still grew, and the outlook has grown more uncertain after October's escalation.
Saudi Arabia's economy contracted for a second consecutive quarter as the war involving Iran and escalating conflict with the Houthis disrupted oil production and exports. The disruption threatens one of the kingdom's weakest economic performances in years.
Gross domestic product declined 3.8% year over year in the third quarter, according to preliminary figures from Saudi Arabia's General Authority for Statistics. That was smaller than the 4.7% decline in the second quarter, but it marked the first consecutive quarterly declines since 2023.
Oil output falls while non-oil activity grows
Oil sector activity plunged 20.4%, compared with a 24.8% contraction in the previous quarter, as attacks on energy infrastructure continued to disrupt production and shipments. Non-oil activity, however, expanded 1.9%.
The figures reflect the eight-month U.S.-Iran conflict, which has triggered attacks on Gulf energy facilities and restricted shipping through the Strait of Hormuz. Saudi Arabia has partly offset the damage by redirecting crude shipments through a pipeline from its eastern oil fields to a Red Sea export terminal.
Houthi attacks cloud the outlook
The third-quarter data also captures a temporary pipeline shutdown in September following attacks. It predates the later recovery in Saudi crude exports to wartime highs.
Fighting between Saudi-led forces and the Iran-backed Houthis escalated in October. Houthi missile and drone attacks disrupted flights at Riyadh's airport, forced changes to major investment events and interrupted activity in the capital's financial district.
Brent crude has traded above $115 a barrel, yet concerns are increasingly shifting toward the conflict's effect on non-oil businesses.
The International Monetary Fund said the kingdom's financial reserves and alternative oil-export infrastructure were helping cushion the damage, leaving it better positioned than several Gulf neighbors.
Saudi authorities previously projected a 3.6% contraction in 2026 and raised their expected budget deficit to 4.9% of GDP.
Source: Investing.com
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