Amid the conflict between the United States and Iran, Saudi Arabia's GDP shrank 4.8% year-on-year between April and June, the sharpest quarterly decline since the coronavirus pandemic, Bloomberg reported.
The kingdom's economic decline in the second quarter of this year was caused by problems with oil exports due to blockages in the Strait of Hormuz. Saudi Arabia's oil sector shrank 24.7%, compared with 2.9% growth in the first quarter. The country's oil production has also declined and remains below pre-conflict levels.
According to IMF forecasts, Saudi Arabia's economic growth rate will slow to 1.7% in 2026. In 2027, growth is expected to accelerate to 5.5% due to the implementation of economic diversification projects, which have become a priority for the government.
Following the outbreak of the US-Israeli war with Iran on February 28, Iranian authorities decided to close the Strait of Hormuz to vessels associated with the US and Israel or countries that supported the aggression against the Islamic Republic. The strait is a strategically important shipping corridor through which approximately 25% of the world's oil trade is transported.
In June, Washington and Tehran signed a memorandum of understanding calling for an immediate cessation of hostilities on all fronts. Saudi oil exports via this route subsequently resumed, but faced new security threats after the ceasefire was violated.