Saudi Arabia is set to weather the US-Iran conflict with significantly more resilience than its neighbors, with Oxford Economics trimming its growth forecast for the year 0.5 percentage points — one of the least drastic downgrades compared to its GCC peers — according to a research note (pdf).

The Kingdom’s strategic geography allows it to find a way around the effectively closed Strait of Hormuz by pivoting to Red Sea ports, the note explains. As the largest oil exporter in the region, the Kingdom could reroute the majority of its 5-6 mn bbl / d through the East-West pipeline and the Red Sea, according to the note. While this shift requires managing logistical constraints — including storage capacity and shipping turnarounds at Red Sea terminals — it provides a critical relief valve that other Gulf producers lack.

Why it matters: Saudi Arabia’s capacity to sustain export volumes enables it to capitalize on rising oil prices, prompting Oxford Economics to upgrade the Kingdom’s 2026 budget balance forecast by 0.5 percentage points.

!_SubHeadl_! The GCC at large

The aggregate real GDP growth forecast for the GCC has been lowered by 1.8 percentage points to 2.6% in 2026 . While growth is expected to hit a low point of 2.3% y-o-y in 2Q 2026, a gradual recovery is anticipated in the second half of the year. This is projected to lead to a “catch-up” growth in 2027, for which the forecast has been raised by 1 percentage point.

The tourism hit: The sector, which is a major non-energy contributor in the region, is expected to see an 11% decline in passenger arrivals in 2026, a 19 pp downgrade from pre-war baselines, as airspace closures and security concerns halt the Gulf stopover model.

The 2026 GCC annual CPI inflation forecast has been revised up by 0.2 pps to 2.5%. While governments are regulating prices for essentials (fuel, dairy, meat), the prices of non-essential goods are expected to rise due to supply shortages and the higher costs associated with rerouting cargo around the conflict zone.

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