Market News
Saudi Arabia’s economy contracts 3.8% as war disrupts oil production Simon Mugo - INVESTING.COM
Investing.com -- Saudi Arabia's economy contracted for a second consecutive quarter as the war involving Iran and escalating conflict with Yemen's Houthi rebels disrupted oil production and exports, threatening 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 released Sunday by Saudi Arabia's General Authority for Statistics.
The contraction was smaller than the 4.7% decline recorded in the second quarter but marked the first consecutive quarterly declines since 2023.
Oil sector activity plunged 20.4%, improving from a 24.8% contraction in the previous quarter, as attacks on energy infrastructure continued to disrupt production and shipments.
Non-oil activity expanded 1.9%, highlighting the relative resilience of industries central to Saudi Arabia's economic diversification strategy.
The figures reflect disruptions from 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 partially offset the disruption by redirecting crude shipments through a pipeline connecting its eastern oil fields to a Red Sea export terminal.
The third-quarter data also captures a temporary shutdown of that pipeline in September following attacks, but predates the subsequent recovery in Saudi crude exports to wartime highs.
The economic outlook has become more uncertain following an escalation in fighting between Saudi-led forces and the Iran-backed Houthis 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.
Although Brent crude has traded above $115 a barrel, concerns are increasingly shifting toward the impact of the conflict on non-oil businesses.
The International Monetary Fund said Saudi Arabia's financial reserves and alternative oil-export infrastructure were helping cushion the economic damage, leaving the kingdom better positioned than several Gulf neighbors.
Saudi authorities previously projected a 3.6% economic contraction in 2026 and raised their expected budget deficit to 4.9% of GDP.
