War Fuels Higher Oil Prices, Narrowing Saudi Arabia's Budget Deficit

Saudi Arabia's budget deficit has shrunk significantly in the second quarter due to the ongoing war, which has disrupted oil production but driven up prices. The Kingdom posted a $9.1 billion shortfall for the three months through June, down from $125.7 billion in the first quarter.

The 34.3-billion-riyal deficit represents a nearly three-quarters reduction from the previous quarter's shortfall. Oil revenue rose by 28% due to higher crude prices, while spending fell by 3.5%. The oil sector contracted almost 25% during the quarter.

Saudi Arabia has found ways to redirect crude through pipelines to the Red Sea port of Yanbu, allowing it to collect much higher prices on reduced volumes. Brent crude was trading near $90 per barrel Thursday and is up more than 47% this year.