08/04/2026 06:03 AST
Wars test the resilience of economies. While the US faced a 30 percent increase in gasoline prices, Egypt was forced to reduce working hours and close shops early to conserve electricity, and developing countries suffered from disruptions in fertilizer supplies, threatening their food security.
As the severity of these crises varies, ranging from supply chain disruptions to rising costs, questions arise about Saudi Arabia's position under these exceptional circumstances.
Ihsan Buhulaiga, founder of the Joatha Consulting Center, told Al-Eqtisadiah: "With the war entering its sixth week, and the strikes continuing, the situation remains ambiguous and volatile, making it difficult to make a definitive assessment of its long-term outcomes."
How does Saudi Arabia maintain price stability despite the war?
The world is confronting one of its most serious geopolitical crises in recent years after war erupted on Feb. 28 between the US and Israel and Iran, triggering retaliatory attacks by Tehran across Saudi Arabia and other Gulf Cooperation Council countries.
A shock to the oil market spread to financial markets.
Buhulaiga explained that the effects of closing the Strait of Hormuz in the early days of the war were not limited to the region but extended to disruptions in global energy supplies, with the shock spreading to financial markets, including bond markets.
The Saudi economy demonstrated resilience in absorbing these shocks and an ability to adapt to changes.
For his part, economist Mohammed Makni confirmed to Al-Eqtisadiah that Saudi Arabia enjoys stable and ideal inflation levels, ranging between 1.8 percent and 2.2 percent during 2025 and continuing at the same level into 2026.
This stability is attributed to the structural reforms implemented in recent years, indicating that inflation will remain moderate in the short term unless the war in the region is prolonged.
The statistics authority publishes a monthly inflation rate index for the Kingdom, but the latest available data is for February, before the war.
He noted that oil prices have risen between 15 percent and 50 percent since the start of the war, with Brent crude exceeding $120 at times due to supply disruptions. This has supported Saudi Arabia's oil revenues in the short term, especially given its success in redirecting its exports westward.
Saudi Arabia adapts to Strait of Hormuz closure through East-West Pipeline
According to Buhulaiga, one of the most prominent factors in this adaptation is Saudi Arabia's ability to utilize the East-West pipeline, which enabled it to transport up to 7 million barrels per day during the last week of March. This contributed to reducing dependence on the Strait of Hormuz and mitigating the impact of supply disruptions.
He suggested that the war's impact on the Saudi economy would be limited if it ended soon. However, its continuation or the expansion of attacks could affect growth rates, which are expected to reach approximately 3.9 percent for the overall economy and 4.2 percent for the non-oil sector, compared to previous estimates that indicated growth of around 4.5 percent to 4.6 percent before the outbreak of the war.
As Makni explained, one of the most important factors in curbing inflation in the Kingdom, and preventing the inflationary effects seen in some other countries from reaching Saudi consumers, is the riyal's peg to the dollar, which stabilizes import prices.
Additional factors include extensive government subsidies for energy and basic commodities, and high oil prices, which allow the government to increase subsidy spending to protect consumers. Furthermore, Saudi Arabia is able to maintain stable oil exports via the Red Sea, compensating for any potential fluctuations in production.
While rising oil prices resulting from regional tensions may increase the cost of goods and services, government subsidies for energy and basic commodities act as a mechanism to absorb some of the inflationary pressures, therefore protecting consumers from any direct impact.
Consumer Protection Association to Al-Eqtisadiah: Periodic indicators show price stability
Local markets showed stability and balance in the prices of basic food commodities during the period from Feb. 28 to March 31, 2026, according to Ahmed Al-Mahliki, CEO of the Consumer Protection Association, as reported to Al-Eqtisadiah. This was based on a report compiled through field monitoring and periodic data indicators.
Despite regional circumstances and global economic fluctuations related to the war, the Kingdom did not witness a general price surge. In fact, some commodities saw a slight decrease, reflecting the strength of local supply chains and the availability of sufficient stock.
Relatively stable consumption supported by Ramadan, Eid Periods
This was confirmed by Buhulaiga, who stated that private consumption remains active, despite a slight decrease in spending through points of sale. Spending reached approximately SR13 billion ($3.46 billion) in the week ending March 28, compared to SR14.8 billion in the previous week. This decrease was driven by a decline in spending on clothing and accessories, while spending on restaurants and cafes saw a notable increase, fueled by seasonal factors related to Eid al-Fitr.
As for liquidity, the money supply, or M3, reached a record high. It reached SR3.218 trillion, supporting continued credit and activity in the private sector. Regarding inflation, prices remained under control, with the Consumer Price Index holding steady at 1.7 percent year-on-year in February 2026, while domestic food and fuel prices remained stable, according to Buhulaiga.
Non-oil sector in March: Between growth, contraction
The Purchasing Managers Index for the non-oil sector in March 2020 saw a significant drop to 48.8 points, falling below the 50-point threshold that separates growth from contraction. This is the lowest reading since August 2020, compared to 56.1 points in February, which was the highest among Middle Eastern countries during that month.
The PMI is considered one of the most prominent indicators for measuring the level of economic activity in the private sector. Any reading above 50 points reflects growth prospects, and the higher the value, the stronger the growth. However, according to Buhulaiga, the index loses some of its predictive power during periods of instability, particularly supply shocks, as it conflates losses in production efficiency with demand trends.
The Saudi economy has demonstrated remarkable resilience in dealing with the repercussions of the war, whether through the stability of commodity prices, the efficiency of supply chains, or the ability to redirect oil exports. This strengthens its capacity to absorb shocks, although challenges remain contingent on future geopolitical developments, according to the founder of the Joatha Consulting Center.
International reports warn of rising global food prices
According to a Reuters report, the war linked to Iran is raising concerns about a new wave of rising global food prices. This is due to disruptions in supply through the Strait of Hormuz, through which approximately 30 percent of the world's fertilizer trade passes. If farmers reduce their use of fertilizers, crop yields could decline. Furthermore, a significant portion of these supplies originates from the Gulf states, which are among the leading producers and exporters of fertilizers and gas-related materials such as ammonia and urea.
Bank of America also warns that the conflict threatens between 65 percent and 70 percent of the global urea supply, and prices have already risen by 30 percent to 40 percent.
In the UK, Richard Walker, the government's cost-of-living advisor, called for a temporary cap on the profits of energy and fuel companies to prevent what he described as "excessive profiteering" from price hikes resulting from the war in the Middle East and disruptions to supplies through the Strait of Hormuz.
This comes amid growing concerns that the ongoing conflict will lead to higher fuel prices and energy bills, exacerbating the cost-of-living crisis in the UK and putting pressure on inflation rates, which are expected to remain above 3 percent this year, contrary to previous forecasts of a decline towards the Bank of England's target.
Food price changes within normal range
According to the association's report, some products have seen price increases recently. Fresh local lamb and some types of rice have risen, while some goods have experienced slight decreases, and other basic commodities such as flour and eggs have maintained stable prices, confirming the market's resilience to external pressures.
Al-Mahliki indicated that the rise in prices of large bags of rice may reflect some consumers' tendency to stockpile, while the increase in meat prices is linked to some impact on imports and higher shipping costs. He also emphasized that the price increase is not widespread and that the limited fluctuations in some prices are within the normal range of temporary changes and should not cause concern or lead people to believe rumors. He advised consumers to compare brands and shop at outlets that maintain stable prices.
This local stability contrasts with the rising prices of food and services in some other countries due to increased oil costs and the impact of the war on import and distribution chains.
Makni anticipates that Saudi Arabia faces a dual challenge in the face of geopolitical events.
While supply chains could be disrupted, potentially driving up import prices, higher oil prices are bolstering government spending and supporting inflation stability. He noted that international indicators, including the International Monetary Fund's assessment and credit rating agencies' forecasts, highlight the Saudi economy's resilience and continued growth in non-oil sectors, with inflation remaining within manageable levels.
Arab News
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