The Saudi Arabia economy is showing resilience despite a sharp hit to oil production from regional conflict, with a surge in crude prices helping offset the impact, according to a report by Al Rajhi Capital.

Saudi crude output fell 23% month-on-month to 7.76 million barrels per day in March, reflecting disruptions linked to heightened geopolitical tensions. 

However, the decline in volumes was partially cushioned by a sharp rally in oil prices, with Brent crude surging more than 63% the same period, boosting revenue dynamics despite lower production. 

The supply chain disruptions and uncertainty caused by the US-Iran war weighed on business activity. The kingdom’s Purchasing Managers’ Index slipped into contraction at 48.8 in March, highlighting the near-term pressure on the non-oil private sector. 

Still, underlying economic fundamentals remain relatively strong. Saudi Arabia’s real GDP grew 5.0% in the fourth quarter of 2025, driven by robust oil and non-oil sector expansion, while inflation stayed contained at 1.8% year-on-year in March. 

Consumer activity also held up, with total spending rising 8.4% year-on-year, supported by strong growth in e-commerce, even as traditional retail segments showed more modest gains. 

Looking ahead, the International Monetary Fund is projecting 3.1% growth for 2026, suggesting continued momentum even as external risks persist.

Inflation has remained contained, with consumer prices rising just 1.8% year-on-year in March, indicating that domestic price stability has largely been preserved despite global commodity shocks.

Consumer activity also showed mixed trends. Overall spending grew 8.4% year-on-year, supported by a surge in e-commerce transactions, although point-of-sale growth remained modest.

Meanwhile, fiscal pressures have emerged, with total government revenue falling 8.6% year-on-year in the fourth quarter of 2025 due to weaker oil income, while spending rose by 3.1%, widening the fiscal gap.

The real estate sector has also slowed sharply, with the total value of commercial transactions plunging 68% year-on-year and residential transactions down 66%, highlighting tighter financial conditions and cautious investor sentiment.

Even so, labour market conditions remain stable, with unemployment among Saudis declining to 7.2%, driven in part by a significant drop in female unemployment.

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