Global Supply Chains Reshape, Focus Shifts to Saudi Arabia

A container ship at a Saudi port (SPA)
A container ship at a Saudi port (SPA)
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Global Supply Chains Reshape, Focus Shifts to Saudi Arabia

A container ship at a Saudi port (SPA)
A container ship at a Saudi port (SPA)

At a time when global supply chains are being reshaped by rising geopolitical tensions and disruptions to key routes, led by the Strait of Hormuz crisis, Saudi Arabia has emerged as a central player in redirecting trade flows.

Leveraging a unique position linking East and West, and advanced logistics infrastructure reinforced by Vision 2030, the kingdom is positioning itself as a leading destination for global investment in the sector.

What began as a crisis response is now a strategic opening, drawing major logistics firms seeking safer, more reliable hubs.

Specialists say that as reliance on Saudi Red Sea ports grows and alternative routes expand, the kingdom is consolidating its role as a core node in global supply chains and a launchpad for cross-border logistics investment.

Global logistics hub

Nashmi al-Harbi, a logistics consultant, told Asharq Al-Awsat that major crises redraw investment maps, and the Strait of Hormuz is no exception.

“Commercial vessels are increasingly turning to Saudi Red Sea ports as a practical, secure alternative, reflecting the resilience of the kingdom’s infrastructure,” he said.

The shift sends a clear signal that Saudi Arabia is not just a consumer market, but a global logistics hub, in line with Vision 2030, he added.

Al-Harbi said the kingdom has become a lifeline for neighboring states, activating Gulf logistics integration and introducing exceptional measures, including customs facilitation and fee exemptions for goods transiting to Gulf markets.

“Global companies look for predictability and trust, and what the kingdom delivered during this crisis proves it offers both,” he said.

He added that Saudi Arabia’s dual access to the Arabian Gulf and the Red Sea has given it a decisive edge over regional peers.

Pipeline

Exports from Yanbu on the Red Sea have climbed to 3.8 million barrels per day, supported by the East-West pipeline, which has a capacity of about 7 million barrels per day, al-Harbi said.

Built in the 1980s for this purpose, the pipeline is now seen by specialists as a highly strategic asset.

On regional coordination, he said Saudi Arabia has signed rapid logistics linkage agreements with Sharjah Port and ports in Oman and Kuwait, redirecting cargo from the Arabian Sea to Red Sea ports and then overland.

“This operational flexibility sets the kingdom apart,” he said.

Al-Harbi expects supply chains to be restructured, describing the crisis as a turning point in Gulf logistics integration and the start of more flexible, adaptive routes.

Crises drive innovation, he said, predicting wider adoption of smart tracking systems and risk management tools across Saudi supply chains.

He added that Gulf states now recognize the scale of the disruption requires new thinking, and that a return to pre-crisis conditions is unlikely.

Saudi Arabia had already been building its logistics infrastructure under Vision 2030, he said, adding that the current crisis has validated and accelerated that strategy, setting the sector on course for unprecedented growth and global positioning.

Operational capacity

Zaid al-Jarba, an expert in digital transformation and logistics, said Saudi Arabia has stood out not only for its location but also for turning geography into operational strength and for growing its logistics influence.

While many viewed Hormuz disruptions as a risk, Riyadh was steadily building alternatives, he said, developing new routes, more prepared ports, expanded airports, and stronger connectivity to ease bottlenecks.

“The advantage is not just access to the Arabian Gulf and the Red Sea, but the ability to connect them. That is a rare strategic strength,” he said.

Goods entering through Red Sea ports can move across the kingdom to Gulf markets, and vice versa, positioning Saudi Arabia as a bridge across the logistics network, he added.

He said logistics crises extend beyond maritime routes, with air freight and multimodal links gaining importance as risks rise.

Saudi airports, with growing cargo capacity and expanding infrastructure, have contributed to that flexibility, he said.

Aviation market

Al-Jarba said several Gulf airlines have turned to Saudi airports, underscoring a shift; Riyadh is no longer just a large aviation market, but an operational platform supporting regional traffic when alternatives are needed.

He said the kingdom’s role during the crisis, combined with its competitive edge, has drawn the attention of global logistics firms.

That edge includes its geographic position linking continents, its dual coastlines on the Arabian Gulf and the Red Sea, and its advanced infrastructure spanning ports, transport networks, and pipelines.

Flexible government policies, including customs facilitation and faster procedures, have further strengthened its appeal, he said, adding that a clear strategy under Vision 2030 makes Saudi Arabia a reliable, scalable base for supply chain operations.



Vessels Carrying Middle East Oil, LNG Exit Hormuz, Head for Pakistan, China

Vessels in the Strait of Hormuz, Iran, May 22, 2026. Majid Asgaripour/WANA (West Asia News Agency) via Reuters
Vessels in the Strait of Hormuz, Iran, May 22, 2026. Majid Asgaripour/WANA (West Asia News Agency) via Reuters
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Vessels Carrying Middle East Oil, LNG Exit Hormuz, Head for Pakistan, China

Vessels in the Strait of Hormuz, Iran, May 22, 2026. Majid Asgaripour/WANA (West Asia News Agency) via Reuters
Vessels in the Strait of Hormuz, Iran, May 22, 2026. Majid Asgaripour/WANA (West Asia News Agency) via Reuters

Two liquefied natural gas tankers are exiting the Strait of Hormuz on Monday, heading to ‌Pakistan and China, while a supertanker with Iraqi crude for China left the Gulf on Saturday after being stranded for nearly three months, shipping data showed.

The US-Israeli war on Iran that began on February 28 has severely curtailed shipping through the Strait of Hormuz, through which around one-fifth of the world's supply of oil and LNG normally flows.

The vessels are among a handful of supertankers exiting the Gulf this month via a transit route ⁠that Iran has ordered ships to use. Last week, three Very Large Crude Carriers (VLCCs) made their way to China and South Korea with 6 million barrels of crude, according to Reuters.

LNG tanker Fuwairit is crossing the Strait of Hormuz on Monday and is expected to discharge its cargo in Pakistan on Tuesday, shipping data on LSEG and Kpler showed. The vessel, sailing under the Bahamas flag, loaded LNG at Qatar's Ras Laffan port around March 28.

Separately, the VLCC Eagle Verona, which exited the strait on Saturday, is expected to reach Ningbo port in eastern China on June 12 to discharge its cargo, ⁠shipping data on LSEG and Kpler showed.

The Singaporean-flagged vessel chartered by Unipec, the trading arm of Asia's largest refiner, Sinopec, loaded nearly 2 million barrels of Basrah crude around February 26, according to the data.

The Eagle Verona was among seven ships Malaysia had sought ⁠permission from Iran to transit, two sources earlier told Reuters. Five of the ships have since exited the waterway, while two more remain in the Gulf.

Before the war began, shipping traffic through the strait averaged 125 to 140 daily passages. Some 20,000 seafarers remain stranded inside the Gulf on board hundreds of ships.


Moody’s Affirms Saudi Arabia ‘Stable’ Outlook Despite Geopolitical Risks

Saudi capital, Riyadh (Reuters) 
Saudi capital, Riyadh (Reuters) 
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Moody’s Affirms Saudi Arabia ‘Stable’ Outlook Despite Geopolitical Risks

Saudi capital, Riyadh (Reuters) 
Saudi capital, Riyadh (Reuters) 

A Saudi Arabia’s sovereign credit rating affirmed at “Aa3” with a stable outlook by Moody’s last week came as an international testament to the resilience of the Kingdom’s economy and its ability to absorb the region's most violent geopolitical shocks, most notably the closure of the Strait of Hormuz since early March.

Moody’s recent rating did not only observe the Saudi strong fiscal position, but it highlighted the sustained government spending and the continued functioning of key logistics infrastructure, particularly the East–West pipeline, which have allowed the trade flows to be maintained.

The agency affirmed that stronger than expected diversification momentum, especially if supported by a durable reduction in geopolitical tensions, could strengthen Saudi Arabia's growth and fiscal prospects in line with the targets of Vision 2030.

Flexible Logistic Alternatives

In its report, Moody’s explained that the affirmation at Aa3 reflects Saudi Arabia's large and wealthy economy, supported by its vast hydrocarbon endowment, low production costs and highly competitive position in global energy markets, alongside improving institutional and policy effectiveness.

It noted that progress under Vision 2030 has underpinned solid non-hydrocarbon growth, supported by sustained public investment, structural reforms, and gradually improving fiscal and economic transparency.

In an analytical reading of the reality of the current regional conflict, Moody’s placed a key scenario assuming continued disruptions of trade flows in the Strait of Hormuz. It affirmed that its decision to maintain a stable outlook reflects expectation that Saudi Arabia's credit profile will remain resilient thanks to its ability to divert most of its oil exports through the Red Sea and its financial assets.

The credit rating agency noted that the East–West pipeline has been key to the country's ability to continue exporting crude oil since early March.

“The pipeline is already carrying 7 mb/d crude oil and the export terminals on Red Sea have been able to load up to 5 mb/d of crude oil equivalent to two-thirds of pre-conflict export levels,” it wrote.

Oil Revenues

At the financial level, Moody’s said that while oil production and export volumes will remain below pre conflict levels due to the effective closure of the strait, this will be more than offset by significantly higher oil prices, which it expects to average $90–110 per barrel in 2026.

As a result, it noted, Saudi government revenue is likely to exceed pre-conflict expectations, providing the authorities with flexibility to increase spending on economic support measures, subsidies and defense.

Also, Moody’s said it expects an improvement in both fiscal and external positions, despite higher spending and government debt burden to remain moderate at around 32% of GDP in 2026, broadly in line with similarly rated peers.

Sorting

Overall, the rating agency said it expects a contraction in Saudi real GDP of around 1.7% in 2026, reflecting a 10% decline in hydrocarbon output and a slowdown in non oil activity amid weaker confidence and higher costs.

However, Moody’s conservative outlook for 2026 matches with positive Saudi official figures. Flash estimates by the General Authority for Statistics (GASTAT) showed that real GDP increased by 2.8% in Q1of 2026 compared to Q1of 2025. This increase was driven by growth across all main economic activities, as non-oil activities rose by 2.8%, reflecting a robust domestic economy and its resistance to external shocks.

Meanwhile, IMF’s growth forecasts for Saudi Arabia in 2026 seem more optimistic. The Fund said the Kingdom is expected to lead regional growth at about 3.1% this year, supported by alternative pipeline capacity.

It noted that growth is forecast to accelerate to 4.5% in 2027, pointing to stronger medium-term prospects. Saudi Arabia has relied on an east-west pipeline to transport oil overland to the Red Sea, ensuring uninterrupted supply to customers despite disruptions to Gulf shipping routes.

While the IMF favored gradual acceleration, Moody’s offered a more-optimistic scenario for next year, saying that “in 2027, we expect a sharp rebound, with growth around 8%, as trade flows through the Strait normalize, oil production gradually increases and oil prices decline from elevated levels.”

Over the medium term, the rating agency said government debt will rise gradually, approaching around 40% of GDP, broadly in line with similarly rated peers, and supported by the sovereign's sizeable GFAs (which we estimate around 18% of GDP) and continued access to financing.

Non-Oil Economy

Moody’s expects Saudi non-hydrocarbon private sector GDP growth to return to around 4–5% after the conflict subsides, among the strongest rates in the Gulf Cooperation Council (GCC), reflecting ongoing structural reforms, sustained public investment and improving private sector participation.

This trend will, over time, reduce the sovereign's exposure to oil market downturns and long-term carbon transition risks, the agency said.

It noted that large scale projects, particularly those led by the Public Investment Fund (PIF) are entering phases that expand capacity in services sectors such as hospitality, tourism, entertainment, retail and restaurants, supporting demand and employment.

“PIF's new strategic plan 2026-2030 is consistent with the approximately $200 billion invested domestically over 2021–25 or 16% of 2025 nominal GDP,” the agency noted in its report.

Financial Flexibility

At the same time, Moody’s said prior fiscal reforms have improved the resilience of Saudi government finances to oil price fluctuations.

In particular, the introduction of a broad-based 15% value-added tax, with limited exemptions, has significantly increased non-hydrocarbon revenue, which accounted for around 45% of total revenue in 2025 against 36% in 2016, it noted.

This represents a meaningful improvement compared to the past and reduces fiscal sensitivity to oil market cycles.

As a result, Moody’s said, Saudi economy and public finances will continue to be better positioned to absorb oil price shocks than in previous downturns, supporting the credit profile over time.

The agency noted that while the country's debt trend was notably sensitive to oil price and production volatility affecting nominal GDP, the current fiscal position allows the Kingdom to maintain a sustained capital spending on Vision 2030 strategic projects, while benefiting from efficient expenditure controls and a high ability to mitigate domestic and international debt markets, which protects the government's net financial assets and maintains the Kingdom's high creditworthiness.

 


Oil Falls, Asian Stocks Climb on Hopes of US-Iran Hormuz Deal

The crude oil tanker Idemitsu Maru, owned by a subsidiary of Idemitsu Kosan, sails through Ise Bay near Chita City in Aichi Prefecture on May 25, 2026, after becoming the first crude tanker bound for Japan to transit the Strait of Hormuz since the Iran conflict began. (Photo by JIJI Press / AFP) / Japan OUT
The crude oil tanker Idemitsu Maru, owned by a subsidiary of Idemitsu Kosan, sails through Ise Bay near Chita City in Aichi Prefecture on May 25, 2026, after becoming the first crude tanker bound for Japan to transit the Strait of Hormuz since the Iran conflict began. (Photo by JIJI Press / AFP) / Japan OUT
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Oil Falls, Asian Stocks Climb on Hopes of US-Iran Hormuz Deal

The crude oil tanker Idemitsu Maru, owned by a subsidiary of Idemitsu Kosan, sails through Ise Bay near Chita City in Aichi Prefecture on May 25, 2026, after becoming the first crude tanker bound for Japan to transit the Strait of Hormuz since the Iran conflict began. (Photo by JIJI Press / AFP) / Japan OUT
The crude oil tanker Idemitsu Maru, owned by a subsidiary of Idemitsu Kosan, sails through Ise Bay near Chita City in Aichi Prefecture on May 25, 2026, after becoming the first crude tanker bound for Japan to transit the Strait of Hormuz since the Iran conflict began. (Photo by JIJI Press / AFP) / Japan OUT

Oil prices fell and Asian stocks climbed on Monday over hopes a deal between the United States and Iran to open the Strait of Hormuz could be brokered.

The price of North Sea Brent crude and West Texas Intermediate slipped close to five percent to $99.41 and $92.49 a barrel respectively, said AFP.

The United States and Iran appear closer than ever to a deal that would end the war that has ravaged the Middle East since late February, sending energy prices soaring and stoking global inflation.

But sticking points in their negotiations have tempered hopes of a swift resolution to restore the transit of oil and gas through the Strait of Hormuz.

US President Donald Trump said on Sunday he had informed US negotiators "not to rush into a deal".

"The negotiations are proceeding in an orderly and constructive manner, and I have informed my representatives not to rush into a deal in that time is on our side," a post to Trump's official Truth Social account said.

Iran's Tasnim news agency said based on their information key clauses of a possible agreement remained unresolved.

One of the main sticking points has been whether Tehran is willing to hand over its stockpile of highly enriched uranium.

The release of Iran's frozen assets held under longstanding US sanctions and whether Lebanon, repeatedly targeted by Israeli strikes, will be included in any peace deal are also key issues.

Markets across Asia climbed in early trade on hopes Washington and Tehran will be able to overcome these hurdles.

Tokyo soared more than three percent in early trade on Monday, while Hong Kong and Seoul were closed for public holidays.

Shanghai inched upwards, with Taipei, Manila, Bangkok, Jakarta, Singapore, Sydney and Wellington also climbing.

Kuala Lumpur was down 0.1 percent.

"The weekend news flow has once again focused on the prospects for a negotiated deal between the US and Iran," said Chris Weston, head of research at Pepperstone.

"According to reports from Donald Trump, a memorandum of understanding has been 'largely negotiated', with details to be announced at some stage soon, although there appears to be limited urgency," Weston said.

Investors will also be keeping an eye on how the US Federal Reserve and its new chief Chair Kevin Warsh react to Personal Consumption Expenditures (PCE) data this week, as well as European inflation metrics.

"The inflation story remains central to the entire setup," said SPI Asset Management analyst Stephen Innes.

"Investors will receive another critical read on Thursday with the release of the Personal Consumption Expenditures index, the Federal Reserve's preferred inflation gauge.

"After several hotter-than-expected consumer and producer inflation reports earlier this month, markets are increasingly concerned that elevated oil prices and supply disruptions tied to the Middle East conflict are beginning to seep into the broader inflation pipeline."

The conflict erupted after the United States and Israel attacked Iran on February 28, and Iran responded with missile and drone attacks across the region.

The United States and Iran have observed a ceasefire since April 8 while mediators push for a negotiated settlement, although Tehran has imposed controls on Gulf shipping and Washington has blockaded Iran's ports.