Saudi Arabia faces economic risks from Houthi attacks and regional conflict

Saudi Arabia is facing significant economic pressure due to regional instability and renewed military escalations in Yemen. The International Monetary Fund (IMF) has adjusted its outlook, predicting a 3.3% contraction of the Saudi GDP in 2026, a sharp reversal from previous growth projections.

The economic strain is driven by Houthi (Ansar Allah) attacks targeting strategic oil facilities, refineries, and transport lines, as well as maritime shipping in the Red Sea. While Saudi Arabia has utilized its East-West pipeline to maintain some oil exports to global markets via the Yanbu port, the collapse of the informal truce has placed these strategic alternatives at risk of missile strikes.

Despite some positive indicators, such as stable inflation and growth in the non-oil private sector, broader economic data shows a contraction of 4.7% in the second quarter of the year and a 17.2% year-on-year decline in total exports as of July. The ongoing conflict poses a direct threat to the Kingdom's ability to maintain its role as a leading global oil exporter.