Saudi Economy Contraction Hits 4.8% Amid Ongoing US-Iran Conflict

Saudi Arabia's economy experienced its most severe quarterly contraction since the Covid-19 pandemic. The country's gross domestic product fell by 4.8 percent year-on-year in the three months ending in June, according to data released on Thursday by the General Authority for Statistics.

The decline marks a sharp reversal from the 3 percent growth recorded in the first quarter of 2026 for the Arab world's largest economy. A 24.7 percent drop in oil activity was the primary driver of the contraction during the April-to-June period.

Although the country is focused on expanding its non-oil economic base to reduce reliance on hydrocarbon revenue, crude oil exports remain the backbone of its economy. The ongoing US-Iran war has heavily impacted the oil sector, with regional hydrocarbon production affected by retaliatory strikes on civil and energy infrastructure in Gulf states.