Saudi Economy Contracts 4.8% in Q2 Amid Middle East Tensions and Oil Sector Slump

Saudi Arabia's economy contracted by 4.8 percent in the second quarter of 2026, marking its sharpest decline in six years, as regional instability and a severe downturn in the oil sector weighed heavily on economic activity.

According to preliminary estimates released on Thursday by the General Authority for Statistics, Saudi Arabia's real gross domestic product (GDP) fell 4.8 percent year-on-year between April and June. The contraction follows 3 percent economic growth recorded in the first quarter of the year.

According to Anadolu Agency, the country's oil sector experienced a sharp decline during the second quarter, shrinking by 24.7 percent compared with the same period last year.

In contrast, the non-oil sector posted modest growth of 0.6 percent, while government activities expanded by 0.9 percent.

The oil sector was the primary driver of the overall economic decline, subtracting 5.4 percentage points from annual GDP growth. Meanwhile, the non-oil sector contributed 0.4 percentage points, while government activities and net taxes on products each added 0.1 percentage points.

The International Monetary Fund (IMF) said the conflict in the Middle East and significant disruptions to shipping through the Strait of Hormuz have affected Saudi Arabia's trade and oil exports.

However, the IMF noted that Saudi Arabia managed to limit some of the impact by redirecting crude oil exports through its East-West Pipeline to Red Sea ports. Higher global crude oil prices also helped offset part of the losses caused by reduced export volumes.

The IMF forecasts that Saudi Arabia's economy will grow by 1.7 percent in 2026. Growth is expected to accelerate to 5.5 percent in 2027 as energy production recovers and maritime trade routes return to normal.