Riyadh, Saudi Arabia – Saudi Arabia’s economy recorded its sharpest contraction since the COVID-19 pandemic, with real gross domestic product declining by 4.8% year-on-year in the second quarter of 2026, weighed down by a steep fall in oil activity and disruptions to crude exports caused by the war in the region.
The Saudi General Authority for Statistics said oil activities declined by 24.7% compared with the second quarter of 2025, making them the primary driver of the economic contraction. Non-oil activities recorded limited growth of 0.6%, while government activities expanded by 0.9%.
War Weighs on Oil Exports
The Financial Times reported that the decline was the largest recorded by the Saudi economy since the COVID-19 pandemic, noting that the war involving Iran and disruptions to shipping through the Strait of Hormuz had directly affected Saudi oil exports and prompted the Kingdom to reduce production during the second quarter.
Saudi newspaper Al Eqtisadiah said the Kingdom’s oil production fell by 26% year-on-year during the second quarter to approximately 7.2 million barrels per day, amid restrictions imposed by the war on shipping operations through the Strait of Hormuz. It added that the economy had grown by 3% in the first quarter of 2026 before moving into contraction in the following quarter.
The newspaper explained that Saudi Arabia managed to redirect part of its exports to the port of Yanbu on the Red Sea coast through the East-West Pipeline, with shipments through this route reaching around five million barrels per day. However, this remained below pre-war export levels of more than seven million barrels per day.
Non-Oil Sector Mitigates the Decline
By contrast, the General Authority for Statistics said continued growth in non-oil activities helped mitigate the impact of the oil-sector downturn. Non-oil activities contributed approximately 0.4 percentage points to economic growth, while oil activities subtracted around 5.4 percentage points from gross domestic product.
However, non-oil growth of 0.6% was significantly slower than the rates recorded in recent years, indicating that some of the effects of the war and trade disruptions had begun to spread into domestic activities, despite the sector remaining in positive territory.
On a quarter-on-quarter basis and after seasonal adjustment, the authority said real gross domestic product declined by 4.9% compared with the first quarter. The fall reflected a 21.5% contraction in oil activities and a 0.5% decline in non-oil activities, while government activities grew by 0.2%.
