Saudi Arabia faces economic contraction as war woes mount

GDP measures the total value of goods and services produced in an economy. If Saudi Arabia’s GDP shrinks by 3.3 percent, the country’s overall economic output is expected to be 3.3 percent lower this year than in the previous year. It does not mean every business or person loses exactly 3.3 percent of income.

The contraction reflects several pressures working together. Iran’s control of the Strait of Hormuz has disrupted a vital oil and gas route. Houthi attacks have also struck oil facilities, tankers, airports, and other transport hubs. These threats can reduce exports, interrupt business, and raise the cost of moving goods and fuel.

The IMF’s forecast was made before the deadliest Saudi attack in more than a decade, which killed 13 people. Saudi Arabia is among the region’s least affected exporters because it has alternative routes, including the East-West oil pipeline. Still, the forecast shows how security shocks can weaken national output.

Airports, oil facilities, tankers, and transport routes are the systems that keep an economy moving. When attacks damage or threaten them, exports can be delayed, flights can stop, and companies may face higher security and transport costs. Businesses may also postpone investment while the danger continues.

The article gives several examples. Houthi strikes have targeted Saudi oil facilities, oil tankers in the Red Sea, and airports. After Saturday’s attack, Riyadh’s international airport suspended operations. The Saudi coalition later said it intercepted another missile, while a government alert warned people of a hostile aerial threat.

These disruptions can reduce oil revenue and interrupt wider commercial activity. They also expose Saudi Arabia’s alternative export route to danger: its East-West pipeline was temporarily shut in September after strikes blamed on Iran-backed groups in Iraq. The IMF’s 3.3 percent contraction forecast therefore reflects both direct damage and broader uncertainty.

The figures show that Saudi Arabia is expected to suffer a much sharper downturn than the regional economy overall. A 3.3 percent contraction means Saudi output is forecast to fall by more than ten times the region’s projected 0.3 percent decline, in absolute percentage terms. The comparison highlights the kingdom’s particular exposure to attacks and oil-route disruption.

The wider regional forecast also changed sharply. Six months earlier, the IMF had expected the region to grow by 1.9 percent. Its latest report instead projected a 0.3 percent contraction. The fund linked the downgrade to a longer closure of the Strait of Hormuz than assumed in its April report.

The forecast is not the final economic result. The report was compiled before the deadliest recent attack in Saudi Arabia. The IMF expects a major regional rebound in 2027, based on the expected reopening of the waterway. Until then, prolonged disruption could keep trade and production under pressure.

The Strait of Hormuz is a waterway used by ships transporting oil and gas. The article describes it as a vital shipping route and a chokepoint for regional energy exports. Its importance comes from the concentration of shipping through one passage: when movement is blocked or made dangerous, exporters and buyers can struggle to move energy safely.

The article says Iran has sought to impose control over the strait since the Middle East war began in late February. Tehran repeatedly attacked ships that transited without its authorisation. The United States responded with a counter-blockade on Iranian ports and increasing escorts for friendly ships.

A longer closure has already changed the IMF’s economic forecast. The fund projected a 0.3 percent regional contraction instead of earlier growth, while expecting a major rebound in 2027 if the waterway reopens. Saudi Arabia is less exposed than some exporters because it can use routes reaching the Red Sea.

When the Strait of Hormuz is blocked or dangerous, Saudi Arabia can redirect crude through routes that do not depend on the waterway. The article identifies the East-West oil pipeline as the main alternative. It carries oil across the kingdom to the Red Sea coast, where tankers can load it for export.

Saudi Arabia also uses the Red Sea as an alternative export route for oil tankers. This reduces the kingdom’s dependence on Hormuz and helps explain why the IMF calls Saudi Arabia one of the region’s least affected exporters. However, the route is not completely safe. Houthi attacks have targeted oil tankers in the Red Sea, as well as Saudi facilities and airports.

The alternative network provides protection, but it has limits. The East-West pipeline was temporarily shut in September after strikes blamed on Iran-backed groups in Iraq. If both the main waterway and substitute routes face attacks, Saudi exports can still be delayed, damaged, or made more expensive.

Saudi Arabia became involved in Yemen’s civil war in 2015 by supporting the internationally recognised Yemeni government militarily. It leads a coalition backing that government against the Houthis, a rival group. The conflict has continued for years and created a deeply entrenched humanitarian crisis in impoverished Yemen.

The article says Yemen’s frozen civil war restarted in July. The renewed fighting pits the Saudi-led coalition against the Houthis. Houthi political bureau member Mohammed Al Bukhaiti said the attacks were meant to show the crown prince that he could no longer wage aggression against Yemen from a safe position.

The conflict now affects Saudi Arabia directly. Houthi strikes have hit oil facilities, Red Sea tankers, airports, and other transport hubs. After the airport attack killed 13 people, US President Donald Trump said he was considering joining Saudi strikes. The Houthis warned that American intervention would put US interests in the region at risk.

An economy depends on reliable infrastructure to produce, transport, and sell goods. A shipping chokepoint concentrates that activity in one route, while oil infrastructure connects production to export markets. If either is attacked or blocked, shipments can be delayed, facilities can close, and companies can lose revenue. Those effects can reduce GDP.

The article shows this chain clearly. Iran’s actions have prolonged the closure of the Strait of Hormuz, while Houthi attacks have targeted Saudi oil facilities, tankers, airports, and transport hubs. Saudi Arabia’s East-West pipeline, an alternative route, was also temporarily shut after strikes blamed on Iran-backed groups in Iraq.

The impact extends beyond Saudi Arabia because oil and gas supply through the region serves wider markets. The IMF cut its regional outlook from 1.9 percent growth to a 0.3 percent contraction. It expects a major rebound in 2027 if Hormuz reopens, showing how one waterway’s status can shape broad economic forecasts.