Saudi Arabia, the world’s leading oil exporter, is facing a significant economic downturn this year. The International Monetary Fund (IMF) announced on Tuesday that the country’s economy is expected to shrink by 3.3%. This decline comes as the nation deals with ongoing attacks from Yemen’s Houthi rebels and the broader impacts of the Middle East conflict.
The IMF’s report, part of its World Economic Outlook, predicts that the regional economy will also suffer, particularly due to Iran’s blockade of the Strait of Hormuz, a crucial shipping route for oil and gas. The report was prepared before a recent attack that killed 13 people at Riyadh’s international airport, marking the deadliest strike in Saudi Arabia in over ten years.
Since the start of the Middle East war in February, tensions have escalated, with the US and Israel launching attacks on Iran. The conflict has reignited Yemen’s civil war, which pits a Saudi-led coalition against the Houthis. This has led to increased attacks on Saudi oil facilities and transport hubs, further destabilizing the kingdom.
On Monday night, explosions were heard in the Saudi capital as the coalition claimed to have intercepted a Houthi missile aimed at the airport. Following the attack, the government issued alerts about a potential aerial threat. US President Donald Trump has indicated he might consider military action against the Houthis, despite previously declining Saudi requests for assistance.
The Houthis have warned against US intervention, stating they would target American interests in the region. Their spokesperson emphasized that the attacks on Saudi Arabia are intended to send a message to the Saudi crown prince about the consequences of the ongoing aggression in Yemen.
The IMF’s report also highlighted that the regional economy is projected to contract by 0.3% this year, a significant drop from earlier forecasts of 1.9% growth. However, it anticipates a recovery in 2027, contingent on the reopening of the Strait of Hormuz.
Despite these challenges, the IMF noted that Saudi Arabia is one of the least affected exporters in the region, thanks to its diverse export routes. The country has used its East-West oil pipeline to bypass the Strait of Hormuz, although this pipeline faced temporary shutdowns due to attacks attributed to Iran-backed groups.
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