IMF says Houthi attacks have limited impact on Saudi economy

The Iranian-backed Houthi group has intensified attacks on Saudi Arabia in recent weeks, focusing on oil facilities and airports. The International Monetary Fund's (IMF) regional director, Jihad Azour, stated that these attacks are currently having a limited economic impact on the kingdom due to robust domestic demand. However, geopolitical uncertainty still poses a threat.

Saudi Arabia, the world's largest oil exporter, has faced challenges from Iran's blockade of the Strait of Hormuz and the Houthis' declaration of a maritime blockade, but shipments continue to flow despite the conflicts.

The IMF's regional report released on Thursday revealed that every Gulf state, except Oman, has experienced reductions in hydrocarbon production. The region's economy is predicted to contract by 4.8% in 2026. Despite the current challenges, the IMF anticipates a significant rebound of around 9.1% growth in the following year. However, this optimism is contingent on the ongoing geopolitical tensions and the lack of progress in diplomacy between the US and Iran.

Iran's Revolutionary Guards have threatened to escalate the conflict if the US military continues to facilitate ship passage through the Strait of Hormuz, and there have been reports of potential new strikes by the US and Israel on Iran following the American midterm elections. If fighting resumes and causes additional infrastructure damage, Azour cautioned that the costs would escalate.

Azour emphasized that the ability to attract investment and talent hinges on stability. He acknowledged that scars from the war will persist for a few years but noted that the Saudi economy's fundamentals remain strong.