Saudi Non-Oil Sector Hits 3-Month High as Iran War Redirects Gulf Business
Updated
Updated · Reuters · Jun 3
Saudi Non-Oil Sector Hits 3-Month High as Iran War Redirects Gulf Business
3 articles · Updated · Reuters · Jun 3
Summary
Saudi Arabia’s non-oil private sector grew at its fastest pace in three months in May, with stronger output and new orders backed by improving domestic demand and restarted projects.
The Iran war is helping divert regional business toward the kingdom, as Gulf firms explore Saudi expansion, investors repatriate capital, and cargo shifts to Red Sea ports to avoid the Strait of Hormuz.
That rerouting is reinforcing Riyadh’s 2026-2030 pivot away from cash-heavy megaprojects toward logistics, tourism, industry and AI, with local operators reporting a surge in demand.
Tourism has also held up better than elsewhere in the Gulf: Saudi trips rose 8% year on year to 37.2 million in the first quarter, while nationwide hotel occupancy reached 66.3%.
The resilience comes with strain—Saudi posted a $33.5 billion first-quarter budget deficit—but the IMF still sees 3.1% growth this year, outperforming several Gulf neighbors expected to contract.
With foreign demand falling, is Saudi Arabia’s rebound a fragile bubble fueled only by domestic spending?
Having bypassed the Strait of Hormuz, how is Saudi Arabia building a truly conflict-proof economy?
How is AI helping Saudi Arabia build local supply chains to counter threats from Iran and the Houthis?
Saudi Arabia’s Non-Oil Private Sector in 2026: Growth Drivers, Supply Chain Challenges, and Vision 2030 Progress
Overview
In May 2026, Dubai’s non-oil private sector showed a modest improvement, with the PMI rising slightly, but the pace of growth slowed to its lowest since June 2021. This slowdown was mainly due to rising operating costs and subdued client demand. Meanwhile, the Iran conflict that began in March 2026 created supply chain disruptions across the region. While Saudi Arabia’s oil revenues cushioned its economy, the non-oil sectors faced direct challenges from these disruptions, leading to higher import prices. Despite these pressures, both Dubai and Saudi Arabia’s non-oil sectors demonstrated resilience and adaptability in a complex environment.