IMF forecasts 3.3% contraction of Saudi economy amid regional conflict and Houthi attacks

Saudi Arabia’s economy is projected to contract by 3.3 percent in 2026, according to the International Monetary Fund’s latest World Economic Outlook report, as escalating Houthi attacks and disruptions to regional shipping routes place increasing pressure on the world’s largest oil exporter.

The IMF also forecast an economic contraction across the region, citing restrictions imposed by Iran on shipping through the Strait of Hormuz, a critical route for global oil exports.

Saudi Arabia has faced mounting economic pressures since Iran restricted navigation through the strait following the US-Israeli attacks on 28th February.

The situation has been further complicated by the resumption of fighting in Yemen in July, following a prolonged period of relative calm between the Iran-backed Houthi movement and Yemeni government forces supported by a Saudi-led coalition.

The renewed conflict has brought military operations onto Saudi territory, with Houthi attacks targeting oil installations, tankers in the Red Sea and transportation infrastructure, including airports.

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The Red Sea has become an important alternative route for Saudi oil exports amid disruptions to shipping through the Strait of Hormuz.

Late Monday, explosions were reported in Riyadh as the Saudi-led coalition announced that it had intercepted a Houthi missile.

The Houthi movement, also known as Ansar Allah, said it had again targeted King Khalid International Airport, where air traffic remained suspended following earlier attacks.

Before the interception was announced, Saudi authorities issued an emergency alert to mobile phones warning residents of a “hostile aerial threat.”

The latest incident followed an attack on the airport on Saturday that prompted US President Donald Trump to say he was considering American participation in Saudi military strikes against the Houthis.

His remarks followed reports that Washington had previously declined Saudi requests for military assistance against the group.

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