Moody’s affirms Saudi’s Aa3 rating with stable outlook

Moody’s gives the Kingdom’s credit a clean bill of health — Hormuz and all. The ratings agency affirmed Saudi Arabia’s Aa3 rating with a stable outlook last week, looking past the closure of the Strait of Hormuz to deliver a vote of confidence in our balance sheet. Aa3 is Moody’s fourth-highest investment-grade notch.

Behind the call: A large, wealthy economy sitting on cheap-to-pump crude, plus steadier government finances and diversification efforts that keep widening the non-oil base.

DATA POINT- Non-hydrocarbon revenue made up some 45% of the total in 2025, up from 36% in 2016, the agency noted.

The war still matters, but our infrastructure is safe for now. The conflict has kept Hormuz effectively shut since early March, and the base case from Moody’s sees a prolonged disruption. Still, the agency does not expect any fresh damage to our energy infrastructure, which bodes well for the Kingdom as it managed to keep crude moving through the East-West pipeline. The alternative route already carries 7 mn bbl / d, loading Red Sea terminals with about two-thirds of Saudi’s pre-conflict export levels, and Aramco is working to increase the capacity even further.

The math might actually work in Riyadh’s favor: Moody’s expected Brent crude to average USD 90-110 / bbl in 2026, a sharp increase from USD 70 before the escalation in late February. The higher oil prices could push government revenue above pre-conflict expectations, making room for spending on subsidies, support measures, and defense.

The growth picture is uglier in the near term. The agency pencils in a real GDP contraction of some 1.7% this year on a 10% drop in oil output, but expects a sharp 8% rebound in 2027 as the situation eases in the strait ad production climbs back.

REMEMBER- Gastat’s flash estimates had real GDP up 2.8% y-o-y in the first quarter, its slowest growth rate since 2Q 2024.

Debt burden stays light: Moody’s sees the government debt burden at 32% of GDP this year, inching higher to 40% over the medium term. The Kingdom had secured 90% of financing needs before the war erupted, but the door remains open if authorities “identify a need for additional financing,” according to the National Debt Management Center.

Moody’s isn’t an outlier: The affirmation follows S&P holding at A+ in March and Fitch keeping its A+ earlier this year, with all three citing the Kingdom's fiscal buffers and export workarounds.

What would move the needle: A durable easing of regional tensions could open the door to an upgrade. However, the downside scenarios include new strikes on strategic oil infrastructure, diversification stalling, or a prolonged slump in oil prices.

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