Houthi attacks have limited economic impact on Saudi Arabia so far: IMF

Houthi attacks on Saudi Arabia have had only a “limited” economic impact so far, supported by strong domestic demand and a robust public sector, the International Monetary Fund's regional director has told AFP. However, continuing geopolitical tensions remain a major risk to the kingdom's economic outlook.

The Iranian-backed Yemeni group has intensified its attacks on Saudi Arabia in recent weeks, targeting oil facilities, airports and other sites as Yemen's dormant civil war has flared up again.

Saudi Arabia, the world's largest oil exporter, has also faced restrictions on crude shipments due to Iran's blockade of the Strait of Hormuz and the Houthis' declaration of a maritime blockade. Despite the disruptions, oil shipments have continued, Jihad Azour, the IMF's regional director, told AFP.

“The impact is limited,” Azour said, citing strong domestic demand and the kingdom's robust public sector.

However, Saudi Arabia's economy is expected to contract by 3.3 per cent this year, reflecting the effects of the US-Israeli war with Iran that began in February.

In its regional economic report released on Thursday, the IMF said hydrocarbon production had declined across every Gulf state except Oman. The regional economy is projected to shrink by 4.8 per cent in 2026.

IMF projects strong rebound amid uncertainty

Despite the expected contraction, the IMF forecasts a recovery, with the region's economy projected to grow by around 9.1 per cent next year. However, Azour cautioned that the outlook remained highly uncertain amid continuing geopolitical tensions and stalled diplomatic efforts between Washington and Tehran.

On Thursday, Iran's Revolutionary Guards threatened to widen the conflict if the US military continued escorting ships through the Strait of Hormuz.

Reports in US and other media have also suggested that Washington and Israel are preparing another round of strikes against Iran, potentially after the US midterm elections scheduled for November 3.

Azour warned that renewed fighting and further damage to infrastructure would increase the economic cost of the conflict.

“The cost will be higher,” he said, referring to the potential consequences of renewed hostilities and additional infrastructure damage.

The IMF's projections assume that oil prices will remain stable at levels above those recorded before the war, but below the levels they could reach if the conflict escalates further.

War could leave lasting economic damage

Azour said the kingdom's ability to attract investment and skilled workers would depend heavily on regional stability.

“On the ability to attract investment and talent, everything will depend on stability,” he said.

He also warned that the conflict would leave lasting consequences for the region, saying that “scars will remain for a few years”.

Nevertheless, Azour said Saudi Arabia's underlying economic strengths remained intact despite the risks posed by the conflict.

AFP