Fitch Ratings has maintained its credit view on Saudi Arabia, but sees the Arab world's biggest economy slowing down in 2026, amid lingering challenges presented by the US-Iran war.
The kingdom's gross domestic product is forecast to slow down to 0.6 per cent, mainly due to the disruption of trade caused by the effective closure of the Strait of Hormuz, the New York-based agency said on Friday.
The economy, however, remains resilient, on expectations Riyadh will boost crude oil output to make up for lost ground and meet external demand as the key waterway reopens.
The strait – which, before the war, was the chokepoint for about a fifth of the world's energy shipments – was reopened during the early stages of a 60-day ceasefire between Washington and Tehran, but has been disrupted again following fresh attacks over the past week.
Growth is expected to rebound in 2027, Fitch said, without providing a figure, as the normalisation of flows through the strait allows higher oil and petrochemicals production, before easing to 2.9 per cent in 2028. Fitch did not give a GDP forecast in its January ratings action on Saudi Arabia.
Non-oil growth, Fitch said, will be hit by an inability to export petrochemicals during the closure of the strait, but this will be balanced out by stronger consumer spending and a recovery in business confidence.
Saudi Arabia's non-oil private sector reported strong growth in business activity in June, hitting the highest level in four months driven by domestic demand, despite a slump in export sales, the seasonally adjusted Riyad Bank Saudi Arabia purchasing managers' index showed earlier this month.
Still, flare-ups in the conflict highlight risks, and the accompanying geopolitical issues, to Saudi Arabia's near-term sustainability, analysts at Fitch said.
"We believe Iran's nuclear programme and capabilities will remain a source of tension in its relations with the US and Israel and further US or Israeli military actions against Iran remain quite likely," they said.
"Although it is less clear whether these would lead to a repeat of the recent escalated regional conflict."
Despite the concerns, Fitch affirmed Saudi Arabia's long-term foreign currency issuer default rating at A+, citing the resilient economy and healthy fiscal buffers.
An A+ rating is the fifth-highest on the Fitch's scale, one spot below high grade. Investment grade makes it easier to access capital markets and raise funding when the need to borrow arises.
"The phased opening of the kingdom's gigaprojects such as those in Neom, the proximity of key events and guidance that the Public Investment Fund will keep domestic spending largely unchanged in its new five-year plan will also support growth," Fitch added.
"This will be balanced by project recalibration, lower government capex and slower credit growth," the firm said.
Saudi Arabia, much like its energy-producing Gulf neighbours, has been severely affected by the US-Iran conflict. But Riyadh has made moves to hasten the resumption of energy flows.
The kingdom, whose economy is less dependent on traffic through the Strait of Hormuz, has used the East-West pipeline to offset some of the capacity disruption. Saudi Aramco, the world's biggest oil-producing company, recently resumed oil loading operations at its Ras Tanura terminal after an almost four-month halt.
Fitch, however, cautioned that a prolonged deterioration in the security environment could include greater disruption to Saudi Arabia's ability to export oil and gas.
"It is too early to discern medium-term impacts from the war on growth. Saudi Arabia has a small exposure to confidence-sensitive sectors such as tourism; exploiting logistical advantages gives some upside," Fitch analysts said.
This week, the International Monetary Fund cut its 2026 growth forecast for the Middle East to 0.7 per cent, a 1.2 percentage point downgrade from April, due to the fallout from the Strait of Hormuz's closure.
Saudi Arabia is expected to experience growth of 1.7 per cent this year, a downgrade of 1.4 percentage points, but pick up to 5.5 per cent in 2027, the Washington-based IMF said.
