Riyadh navigates a changed landscape
10 March 2026
Since late February, Riyadh has been contending with challenges both old and new. A month ago, the Saudi government's principal agenda item was the rationalisation of its gigaprojects pipeline – managing Vision 2030's ambitions within sustainable fiscal limits. That remains central.
But the launch of Operation Epic Fury on 28 February changed the regional calculus overnight. The US-Israeli strikes on Iran and the subsequent closure of the Strait of Hormuz have removed 20% of the world's daily oil supply from normal circulation and hamstrung the Gulf’s broader cargo logistics.
Brent surged on the news, with some banks forecasting a sustained move above $100 a barrel if the closure holds. Yet of all the Gulf producers, Saudi Arabia remains best placed to absorb the shock. It has two coasts, and Riyadh has moved quickly to redirect flows westward.
The upgraded East-West pipeline connecting the Eastern Province oil fields to the Red Sea terminal at Yanbu has a carry capacity approaching 7 million barrels a day (b/d) – close to the kingdom’s total export volume in February. Egypt has also offered the use of its Sumed pipeline to carry Saudi crude onward to the Mediterranean.
But operational loading constraints at Yanbu mean the terminal cannot handle the full volume that the East-West pipeline can carry, and vessels bound for Asia must still transit the Bab El-Mandeb, where traffic remains at roughly half pre-crisis levels. Re-routing oil exports also carries its own costs. The western route is therefore an advantage, not a solution.
Fiscally, for a kingdom whose 2026 budget was built on $64-a-barrel oil – against the IMF's estimated fiscal breakeven of $91 a barrel – a sustained price above the budgeted threshold could narrow the forecast deficit.
Above $100, even Saudi Arabia’s recent sovereign bond programme would become more of a choice than a necessity. The disruption of the Iran war could thus inadvertently relieve some of the fiscal pressure that Riyadh has been managing. The question is how long it lasts.
New hands, harder brief
The Hormuz crisis landed a fortnight after the most consequential personnel change of the Vision 2030 era. On 12 February, King Salman replaced more than 40 senior officials. The headline appointment was Fahad Al-Saif as Investment Minister, replacing Khalid Al-Falih, who moved to a Minister of State role.
Al-Falih built the ministry, ran the regional headquarters programme and was the kingdom's most recognisable dealmaker internationally. Al-Saif is a specialist of a different kind: a sovereign debt expert who created the National Debt Management Centre and ran the global capital finance division of sovereign wealth vehicle the Public Investment Fund (PIF).
The signal was unambiguous before the war started. Al-Falih’s target of $100bn a year in foreign direct investment by 2030 was never reached – actual inflows ran at less than half that.
Attracting long-term strategic capital into a country still finding its regulatory footing proved harder than selling sovereign bonds to yield-hungry institutions. Riyadh has apparently concluded that the latter is, for now, the more achievable priority. Al-Saif knows those investors. That is why he has the job.
The brief has since become considerably harder. Foreign institutional investors recorded net equity selling of SR5.8bn ($1.55bn) on the Saudi Stock Exchange (Tadawul) in the first five trading days following the strikes – the sharpest sustained outflow since the Tadawul opened to direct foreign participation in 2015.
The Capital Market Authority had only just eliminated the Qualified Foreign Investor requirement on 1 February, opening the Tadawul fully to international investors for the first time. That reform, a genuine structural advance, has been overtaken by events.
Al-Saif will need to reconstruct investor confidence at a moment when the region's risk profile has structurally shifted.
Pruned priorities
The reshuffle and the Hormuz crisis both land on top of a portfolio restructuring already under way. Fitch Ratings estimates that of $115bn in gigaproject contracts awarded since 2019, the PIF has financed roughly half. The foreign capital that was supposed to carry the other half never arrived.
In response, the PIF cut budgets across more than 100 investee companies by up to 60% at a board review in late 2024. The subsequent rationalisation has continued ever since.
The Line has been scaled back; the completion of the ongoing scheduled work deferred to 2045. Trojena has lost the 2029 Asian Winter Games and been substantially scaled back. Work on the foundations of the Mukaab are ongoing, but the future of works above grade remains uncertain.
Neom’s principal assets are being considered for transfer to established state operators – Oxagon to Saudi Aramco, Trojena to the Sport Ministry.
The assets that are surviving the cut are those that are more concrete and bankable.
Oxagon’s Green Fuels project is well under way, with its green ammonia plant on track for completion in 2027. The Red Sea Project’s first resorts are open. Expo 2030 Riyadh and the 2034 Fifa World Cup meanwhile sit at the top of the revised priority list – both carrying hard international deadlines that cannot be negotiated away.
The execution risk remains substantial, but the direction of travel and the focus are improved.
Bottom line
Heading into 2026, Saudi Arabia was forecast for 4% growth. Circumstances may now dictate whether that will hold. Of late, however, the non-oil economy has proved its resilence – growing in spite of Riyadh’s recent spending redactions.
According to the General Authority for Statistics, the sector now accounts for 55.6% of real GDP – up from 45.4% when Vision 2030 launched in 2016 – with unemployment among nationals at a record low of 6.3% and inflation contained at 2.2%. These are delivered results, not projections, and they represent the most significant structural shift in the Saudi economy since oil was discovered.
Public debt is heading towards 36% of GDP, and the self-imposed ceiling of 40% is no longer comfortably distant. But the country’s non-oil growth base now gives Riyadh options that previous governments did not have when oil prices moved against them. The programme is working, even if its implementation to date has been haphazard.
The cabinet reshuffle signals the Crown Prince understands that the moment requires recalibration. The question is whether Al-Saif can do what Al-Falih could not: convert institutional interest in Saudi Arabia into committed, long-term capital at a time when the region is unsettled, the strait closed and foreign investors are heading for the exits.
If the Hormuz closure resolves quickly, the kingdom could bank a windfall and carry on. If it holds, the pressure on Vision 2030's delivery timeline – already stretched – could become acute. Either way, the era of building amid abundance is over. Saudi Arabia is now being required to transform under stress. That is a harder test. It is also the one that counts.
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