Saudi Arabia Shrinks Deficit as War Drives Oil Prices Higher

The finance ministry reported a deficit of 34.3 billion riyals—roughly $9.1 billion—for the second quarter, a sharp improvement from the 125.7 billion riyals recorded in the first quarter. This fiscal recovery stems from a 28% increase in oil revenue, bolstered by Brent crude prices climbing toward $90 per barrel. By redirecting exports through pipelines to the Red Sea port of Yanbu, the Kingdom managed to sustain high margins despite significantly lower output volumes following Iranian attacks and the closure of the Strait of Hormuz.

Economic stability remains fragile, as the broader economy faces its steepest contraction since the pandemic. Riyadh currently requires oil prices near $115 per barrel to balance its books, a notable increase from the $96 threshold observed last year. With second-quarter expenditure running 11% higher than the same period in 2023, officials have signaled that some Vision 2030 projects may face delays or cancellation. The IMF projects the deficit will narrow to 3.7% of GDP this year, provided the current price environment offsets the ongoing production shortfalls.