Iran's situation disrupts crude oil exports, Saudi Arabia's Q1 economic growth rate slows to 2.8%

Saudi Arabia's economic growth rate in the first quarter slowed to its lowest level since mid-2024, as its key oil industry was affected by the war with Iran. According to preliminary data released by the Saudi Statistics Bureau on Thursday, the country's Gross Domestic Product (GDP) grew by 2.8% year-on-year in the first three months of this year, compared to 5% growth in the previous quarter. The growth in the oil industry was 2.3%, lower than the 10.8% in the previous quarter. Non-oil industries - which the authorities have focused on in their efforts to drive the $1.2 trillion economic transformation process - saw their growth slow from 4.3% in the previous quarter to 2.8%. The war with Iran has led to a slowdown in Saudi economic growth. These figures provide the first detailed look at the impact on the Saudi Arabian economy since the US and Israel launched a war against Iran on February 28. Iran retaliated by attacking US allies in the Gulf region, including targeting energy facilities within Saudi territory, disrupting crude oil production and export. This conflict led to a near halt in the flow of the Strait of Hormuz, a vital passage that typically carries one-fifth of global oil transport. Saudi Arabia has been able to offset some of the losses by transporting crude oil through pipelines to the Red Sea port of Yanbu. This has allowed Saudi Arabia to benefit from the surge in oil prices, reaching a wartime high of $126 per barrel on Thursday. Jihad Azour, head of the IMF's Middle East and Central Asia department, stated this month, "The measures taken by the Saudi authorities in the early stages of the crisis have made them more resilient." The IMF predicts Saudi Arabia's economic growth rate for this year to be 3.1%, down by 0.9 percentage points from the organization's forecast in October last year. The IMF believes that compared to some neighboring countries, Saudi Arabia has been less impacted. The UAE's departure from OPEC after six decades of membership could pose a challenge to Saudi Arabia's economy. The UAE officially left OPEC on May 1, dealing a significant blow to the oil organization dominated by Saudi Arabia and weakening its ability to control oil prices by adjusting oil supply. This surprising move is the culmination of years of tensions between the UAE and Saudi Arabia over oil production policies and regional political influence.