Saudi’s A+ rating stands firm on war buffers, says S&P

A vote of confidence: S&P Global Ratings kept Saudi Arabia’s A+ rating with a stable outlook despite the war.

Why? The Kingdom has the buffers to ride out disruptions and withstand the economic fallout from the Iran conflict — “our current base case is that the main threats to Saudi Arabia will begin to fade by the end of March,” the agency said in its latest ratings update.

It’s all about when this whole situation will be over: The base case assumes tensions will begin to ease by late March, allowing the government to sustain non-oil growth momentum and continue its investment drive.

The rationale

Thank our oil export routing channels: The affirmation was largely due to our ability to bypass the effectively closed Strait of Hormuz via the 1.2k-km East-West pipeline as a “critical mitigator.” The route allows the Kingdom to redirect exports to the Red Sea port of Yanbu, maintaining a flow of 5-7 mn bbl / d despite the maritime disruption.

Production and storage buffers add breathing room…: The Kingdom also benefits from some 30 mn bbl in domestic storage and refining capacity overseas, including in the US and Asia. Combined with 2-3 mn bbl / d of spare production capacity, this gives the government room to stabilize exports and ramp up output once hostilities ease to offset temporary supply losses, S&P said.

…and we have a more solid population: S&P noted that Saudi is less vulnerable to population displacement than its neighbors due to its large native population and comparatively lower reliance on expatriate labor.

IN CONTEXT- The affirmation comes at a volatile moment for global energy markets. Following military strikes on Iran in late February, the Strait of Hormuz — a vital artery for one-fifth of global oil shipments — has been restricted. This disruption sent Brent crude prices surging to nearly USD 120 / bbl earlier this month before settling near USD 101 on Friday.

How the war evolves will matter: A downside scenario could emerge if the conflict drags on or intensifies, particularly if energy infrastructure becomes a direct target or if government borrowing rises sharply enough to weaken public finances. Aramco CEO Amin Nasser warned a prolonged blockade could have “catastrophic consequences”, as using overseas storage to meet demand is a stopgap that cannot be sustained.

On the other hand, a sustained easing of tensions and continued progress on economic diversification could open the door to a future upgrade.

In the medium-long term

Growth outlook remains solid: S&P expects real GDP growth of 4.4% in 2026, supported by higher oil production — forecast to reach 10.1 mn bbl / d — and elevated energy prices, broadly in line with the government’s 4.5% forecast for 2026. Growth is then projected to average 3.3% between 2027 and 2029. Driving the growth will be the non-oil sector, which now accounts for about 70% of GDP, buoyed by infrastructure spending, rising women’s workforce participation, and strong household consumption.

As for inflation, the SAR’s peg to the USD is expected to keep inflation contained at around 2% over the next four years despite global price pressures.

Meanwhile, the fiscal deficit is projected to reach 5.5% of GDP in 2026, averaging 4.1% between 2027 and 2029, while current account deficits are expected to average 2.3% of GDP over the same period. Borrowing is set to rise to fund diversification projects, pushing gross debt to around 38.7% of GDP by 2029. Even so, the government is expected to maintain strong net assets averaging about 42% of GDP, supported by growing non-oil revenues and continued access to domestic and international funding markets.

REMEMBER- We entered the crisis already running a wider-than-expected fiscal deficit of 5.7% of GDP for 2025, well above the budgeted 2.3%. The running deficits are framed by the government as a deliberate policy choice aimed at maintaining a countercyclical fiscal stance and safeguarding the diversification momentum.