At a time when the conflict between the United States and Iran plunged the region into one of its most severe periods of tension in years, closed the Strait of Hormuz, and drove up oil prices as well as shipping and insurance costs, Fitch Ratings reaffirmed Saudi Arabia's sovereign credit rating at A+ with a Stable outlook. The decision raises a fundamental question: How did the Saudi economy manage to preserve its financial resilience in the midst of the crisis?
The answer extends well beyond higher oil prices. It lies in a comprehensive framework of reforms built up over many years, including the creation of financial and logistical buffers, the diversification of funding sources, the development of energy infrastructure, and the strengthening of the private sector, all of which have made the economy far more capable of absorbing external shocks.
As the international financial and business community awaits the International Monetary Fund Executive Board's comprehensive report on its 2026 Article IV Consultation with Saudi Arabia, due later this month, data released by the Fund's mission, together with figures from the Saudi Central Bank and the Kingdom's balance of payments, reveal how the Saudi economy weathered one of the most challenging geopolitical tests in recent years.
Alternative Arteries
When Tehran announced the closure of the Strait of Hormuz, through which roughly one-fifth of global oil trade passes, many expected Gulf oil exports to face widespread disruption. Saudi Arabia, however, had been preparing for such a scenario for decades by building an integrated system to safeguard its oil exports without relying solely on the Strait.
That strategy included expanding the East-West Pipeline, which transports crude oil to the Red Sea ports of Yanbu, increasing its carrying capacity, establishing strategic storage facilities in key markets around the world, and maintaining the world's largest spare oil production capacity.
When the crisis erupted, this system enabled Saudi Aramco to continue honoring its export commitments. The company increased supplies through the pipeline, drew on its overseas inventories, and utilized part of its spare production capacity, limiting the decline in shipments and mitigating the impact of the Strait's closure on Saudi oil exports.
Why Did Inflation Remain Low?
Although the conflict pushed up global oil prices as well as shipping and marine insurance costs, the transmission of those shocks to the domestic economy remained limited compared with many other economies.
This was largely due to efficient supply chains, the stability of the Saudi riyal's peg to the US dollar, ample strategic reserves of essential goods, and fiscal and monetary policies that helped preserve market stability.
As a result, the International Monetary Fund expects average inflation in Saudi Arabia to reach only about 2.3 percent in 2026, a level that remains low compared with most advanced and emerging economies.
Current Account Surplus
At first glance, the conflict might have been expected to weaken Saudi Arabia's external accounts. Yet first-quarter data told a different story. The Kingdom recorded a $4.1 billion current account surplus, its first in nearly two years following a prolonged period of deficits, compared with a $8.2 billion deficit in the fourth quarter of 2025.
This turnaround resulted from a twofold equation. Although oil export volumes declined because of the disruption, higher prices offset much of the shortfall. At the same time, imports slowed amid shipping disruptions, while the travel balance improved as spending by visitors within the Kingdom increased.
The Tools That Reinforced Stability
The current account surplus was only one factor underpinning the economy's resilience. Saudi Arabia also entered the crisis equipped with a range of financial strengths that helped preserve stability. The data point to several key pillars:
Reallocation of External Assets: Investment operations by government entities and Saudi Arabia's sovereign wealth fund recorded a sharp increase in the liquidation of foreign assets during the first quarter of 2026. Assets sold or repatriated totaled approximately $22.6 billion, up from just $4 billion in the fourth quarter of 2025, an increase of 460 percent. This sharp rise reflects an accelerated redeployment of external liquidity into the domestic economy.
Stable Reserve Assets: While government entities significantly increased the monetization of foreign assets, the Saudi Central Bank's reserve assets remained robust and stable, standing at SAR 1.862 trillion (approximately $496.5 billion) at the end of the first quarter, up 9.32 percent year over year. This illustrates an efficient allocation of financing roles. Rather than drawing directly on the Kingdom's official foreign exchange reserves, government entities chose to rebalance their investment portfolios and monetize part of their overseas assets to finance domestic projects, strengthening Saudi Arabia's financial buffers and reinforcing the foundations of its sovereign creditworthiness.
Sovereign Creditworthiness: These indicators in the balance of payments and the level of reserve assets were directly reflected in the Kingdom's sovereign credit profile. In their 2026 reviews, the major global credit rating agencies reaffirmed the structural strength of the Saudi economy and its high degree of resilience to regional geopolitical shocks. Fitch Ratings and S&P Global Ratings both affirmed Saudi Arabia's A+ rating with a Stable outlook, while Moody's maintained its Aa3 rating.
According to the agencies' reports, these ratings are fundamentally supported by the Kingdom's substantial net foreign sovereign assets and financial reserves, which provide external payment coverage well above that of similarly rated countries. They also reflect the growing resilience of the non-oil economy and Saudi Arabia's ability to secure alternative sources of financing for Vision 2030 projects without drawing down its core monetary reserves.
Proactive Financing: Before the crisis escalated, the government leveraged its strong credit profile and relatively low public debt, equivalent to 34.4 percent of GDP, to secure $13 billion in external financing during the first quarter, according to the National Debt Management Center's announcement in January. An additional $14 billion was raised through international sukuk issuances, commercial loans, and bond offerings by major Saudi banks and corporations, which also benefited from the Kingdom's strong sovereign credit standing. As a result, total external borrowing by Saudi residents reached $27 billion.
Investment Flows: The investment sector likewise reflected the depth of global institutional confidence. Contrary to the capital flight often seen during periods of geopolitical tension, the Saudi stock market experienced no wave of foreign investor withdrawals. Instead, nonresident investors remained net buyers of Saudi equities, recording net purchases of $2.4 billion during the first half of 2026, bringing their total holdings to more than $110 billion. This was accompanied by exceptional resilience in foreign direct investment, which posted $1.8 billion in net inflows during the first quarter alone, supported by growing confidence in the ongoing economic and legislative reforms under Vision 2030.
Banking Sector: The strength of the banking sector also enhanced the economy's ability to weather the period of heightened tensions. Saudi banks maintained high levels of capitalization and liquidity while private sector lending continued to expand, ensuring businesses and projects retained access to financing despite turbulence in global markets. The International Monetary Fund considers the soundness of the financial sector to have been one of the principal pillars supporting economic stability throughout the crisis.
What Has Vision 2030 Changed?
Perhaps the best way to measure the success of Saudi Arabia's reforms is to ask a hypothetical question: What if the current crisis had occurred before the launch of Vision 2030?
At that time, the economy depended far more heavily on oil revenues, while financing tools and liquidity management options were considerably more limited. The contribution of non-oil activities was also substantially smaller than it is today.
Today, however, the economy rests on a far more diversified foundation, encompassing non-oil revenues, domestic and international debt markets, a strong banking sector, the Public Investment Fund, substantial foreign reserves, and advanced logistics infrastructure. Together, these elements have provided the Kingdom with a robust financial safety net, enabling it to absorb the shock without experiencing major disruptions.
The IMF's Assessment
The International Monetary Fund's 2026 mission concluding statement documented the Saudi economy's positive indicators, affirming that the economy has demonstrated a high degree of adaptability and a clear capacity to withstand external shocks. The Fund attributed this resilience to the structural strength of the national economy, the continued development of logistics infrastructure, and the ongoing expansion and diversification of the Kingdom's productive base and non-oil sectors.
At the same time, the IMF lowered its forecast for Saudi Arabia's economic growth in 2026 to 1.7 percent, a reduction of 0.3 percentage points from its previous projection. However, it raised its forecast for 2027 to 5.5 percent.
The downward revision does not reflect underlying weakness in the Saudi economy as much as it reflects the impact of the regional environment. Despite recording growth of approximately 3 percent in the first quarter of 2026, continued geopolitical tensions and higher shipping and insurance costs could weigh on the pace of economic activity during the remainder of the year.
Challenges Remain
Despite the strength of Saudi Arabia's financial and logistical buffers, a prolonged period of regional tensions could pose additional challenges. These include higher transportation and insurance costs, slower global trade, the possible postponement of certain investments, and mounting pressure on major development projects should energy and logistics costs remain elevated. For this reason, the International Monetary Fund emphasizes that continued structural reforms, a greater role for the private sector, and stronger productivity will remain essential to sustaining growth in the years ahead.
Resilience Has Become Economic Policy
The experience of recent months shows that what Saudi Arabia faced was not merely an oil crisis or a passing geopolitical test. Rather, it was a comprehensive test of the economy's ability to absorb and manage shocks. The convergence of a current account surplus, the redeployment of external assets, the preservation of strong foreign reserves, the securing of low-cost financing, and the continued inflow of investment demonstrates that sovereign liquidity management has become an integral part of a comprehensive economic strategy rather than a temporary response to crises.
As the International Monetary Fund's final report is awaited, the message emerging from Saudi Arabia's experience is clear: investment in economic resilience has become one of the Kingdom's most important sovereign assets, and perhaps its most valuable one, in a world increasingly marked by geopolitical and economic shocks.
