GDP down, deficit down

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WHAT WE’RE TRACKING TODAY

Iraqi PM postpones Saudi trip after joint US-Saudi strikes on Iraqi soil

Good morning, all. We kick off the week with the first hard data from the Hormuz disruption, and it tells two stories. Saudi GDP contracted at its sharpest annual pace since the pandemic in 2Q, but higher oil prices padded the treasury enough to shrink the deficit to a yearly low. We also track Saudi Arabia’s new 43-country maritime coalition for the Red Sea, and PIF’s record-sized leveraged buyout clearing for closing.

A little war update before we dive in: US President Donald Trump said that the US has “been asked by Iran, and other Middle Eastern countries, to hold off any attack in that the perimeters of a deal has been agreed to.” Trump said the agreement would include the complete opening of the Strait of Hormuz and an end to Iran’s nuclear threat.

Riyadh-Baghdad ties strained

Iraqi Prime Minister Ali Al Zaidi will postpone a planned trip to Saudi Arabia following the US-Saudi strikes on Iraq, CNN Arabic reports, citing a government source. Meanwhile, Baghdad demanded evidence for Saudi claims that Iran-backed groups operating from Iraq launched drone attacks targeting Saudi critical infrastructure on Monday and Tuesday.

REMEMBER- US-Saudi strikes on Iran-backed targets in Iraq escalated the conflict with deeper implications across the region, analysts told The Guardian. The two parties joined forces to attack Iraqi armed groups in retaliation for drone attacks on Saudi oil facilities. Iraq’s Popular Mobilization Forces said the strikes killed at least 20 fighters and wounded 32.

The US claims it was organized with Iraq, Baghdad denies: US President Donald Trump said the strikes were coordinated with Iraq, while Baghdad says it had no “prior knowledge” of them. Government spokesperson Haider Al Aboudi said Iraq didn’t greenlight attacks against any sites or groups inside its territory, considering such actions as violations of its sovereignty and deliberate targeting of its official institutions, The Guardian reports, citing the Iraqi News Agency.

The Kingdom’s attacks targeted only militant groups with no intention to harm the Iraqi government or people, a Saudi official told Al Arabiya. The strikes hit militia military warehouses connected to recent drone attacks on Saudi infrastructure, the official said.

The escalation comes as Iraq struggles to prevent the US-Iran conflict from spilling across its borders. The country was heavily affected by the closure of the Strait of Hormuz, through which most of its oil is exported, while its governments have long sought to balance ties with Washington and Tehran.

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GCC weighs region-wide logistics platform

The GCC General Secretariat is reviewing a proposal to create a unified digital platform linking logistics services across the six member states, the Kuwait Chamber of Commerce and Industry told Al Eqtisadiah after it submitted this proposal. The proposal has been referred to ministerial committees for review before any implementation decisions.

What it would do: The platform would connect shipping companies, importers, exporters, warehouse operators, ports, and logistics zones, while providing real-time data on port capacity, transport costs, customs procedures, storage availability, and freezones. It would also include AI-powered route and service matching, allowing users to compare logistics options across sea, land, and air. A pilot phase is planned before any wider rollout.

Why it matters: The Hormuz crisis has highlighted the lack of a coordinated Gulf logistics system, with cargo rerouted through ad hoc bilateral arrangements and emergency measures. A shared platform could make capacity and routing options more transparent across the GCC, although the proposal must first clear ministerial review, and GCC integration projects have often taken years to move from agreement to implementation

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The big story abroad

No single story is dominating international headlines this morning — among those receiving top billing:

#1- Most of the 60k North African migrants who illegally crossed into Spain’s Ceuta have made their way back to Morocco, citing severe hunger, lack of shelter, and hostility from local authorities and residents that made remaining unbearable.

#2- FIFA President Gianni Infantino’s future with the football governing body could be in trouble after he pulled the plug on a plan to create a commercial entity to take over the World Cup and sell a stake to investors. The proposal was met with heavy criticism from fans, lawmakers, and other football governing bodies and accusations of selling out.

#3- The aftermath of the selloff: Following a severe collapse in South Korea’s stock market, the benchmark Kospi index fell around 40% from its June peak due to a semiconductor selloff and volatile single-stock leveraged ETFs, South Korean retail investors are directing their anger at President Lee Jae-myung and financial regulators. Many investors are vowing to exit the market after incurring massive losses.

Conflict dents Saudi GDP, but oil price shrinks 2Q deficit

The Hormuz shock has landed in the hard data, and it reads two ways depending on where you look. Saudi’s real GDP contracted 4.8% y-o-y in 2Q 2026, according to a flash estimate from Gastat (pdf), the Kingdom’s first annual contraction since 4Q 2023 and its steepest since the pandemic-hit 2Q 2020. Yet in the same quarter, government revenue rose 12% and the budget deficit shrank to its smallest level of the year, according to the finance ministry’s 2Q budget performance report (pdf).

The GDP contraction was almost entirely oil. Oil activities plunged 24.7% y-o-y as Aramco cut output following the near-closure of the Strait of Hormuz, subtracting 5.4 percentage points from headline growth, more than the entire 4.8% contraction. Strip oil out, and the economy still expanded.

The GDP non-oil number is the one to watch. Non-oil activity grew just 0.6% y-o-y, down from 2.9% in 1Q and 4.6% in 4Q 2025, the fourth straight quarter of slowing non-oil growth. On a seasonally adjusted basis, non-oil output actually shrank 0.5% q-o-q, its first quarterly contraction of the cycle. Government activity rose 0.9%.

REMEMBER- We flagged the forecast cuts last month: A Reuters poll had trimmed Saudi 2026 growth to 1.4%, below the IMF’s 1.7%, even as the Kingdom stayed one of only two GCC economies (with Oman) still expected to grow.

But real GDP counts barrels, and the budget counts SAR. The government’s oil revenue rose 22% y-o-y to SAR 185.1 bn during the quarter, as higher crude prices more than made up for the lost export volumes, a mechanism the IMF flagged when it concluded its Article IV consultation last week. Total 2Q revenue climbed 12% y-o-y to SAR 338.8 bn, and the quarterly deficit shrank to SAR 34.3 bn, down from a record SAR 125.7 bn in 1Q.

That does not mean the books are balancing. Spending rose 11% y-o-y in 2Q and 15% across 1H, outpacing revenue and leaving a first-half deficit of SAR 160 bn. That is already 97% of the SAR 165.4 bn shortfall the government budgeted for the entire year, with two quarters still to run. Either 2H swings sharply toward balance or the Kingdom overshoots its deficit target.

Where the money went tells you the fiscal strategy: Riyadh is spending into the shock rather than pulling back. First-half subsidies more than doubled y-o-y (up 117% to SAR 30.8 bn), capital spending rose 32% to SAR 89.7 bn, and outlays on infrastructure and transport climbed 21%. The subsidy surge looks like the “targeted, temporary” cushioning the IMF endorsed.

How it is funded matters more than the deficit itself. The entire 1H shortfall was covered by borrowing, with no drawdown of government reserves, which was held at SAR 399.1 bn. Public debt rose to SAR 1.685 tn by the end of June from SAR 1.519 tn at the start of the year.

What’s next: The IMF is holding its full-year 2026 call at 1.7% (2.6% non-oil) and sees a 5.5% rebound in 2027, both contingent on Hormuz traffic normalizing, which economists polled by Reuters expect over the next six to 12 months. But with 2Q at 4.8% contraction, 1H is tracking negative, so that full-year forecast now leans on a sharp second-half recovery that has not begun. Watch the 3Q flash estimate, due end-October, for whether non-oil re-accelerates or the q-o-q contraction deepens.

Saudi leads maritime defense alliance to protect Red Sea trade

The Houthi attacks are leading countries to coalesce around Saudi to defend Bab Al Mandab. The Defense Ministry announced a new multinational maritime defense alliance after meeting with the representatives of 43 countries alongside an EU delegation in Riyadh, according to press releases (here and here). The coalition aims to protect maritime security and freedom of navigation, secure international trade routes and energy supplies, and protect maritime interests in Bab Al Mandab, the Red Sea, and the Gulf of Aden.

Who are the members? The current signatories include Saudi Arabia, Kuwait, Bahrain, Qatar, Pakistan, Turkey, Egypt, Jordan, Yemen, Bangladesh, Nigeria, Sudan, Djibouti, and Somalia, SPA reported. Other participating nations are also completing their internal procedures and approvals to join the declaration, with the alliance open to whoever is interested.

How will it work? The members will enforce maritime security through information and intelligence sharing, operational planning, joint exercises, joint patrols, training and capacity building, and joint maritime operations. However, no military commitments have been made by any member (yet).

On Saudi soil: The Kingdom will host its headquarters, with a leadership and command center, a joint maritime operations center, and a general secretariat based in Saudi.

We knew this was coming: Riyadh has been working with dozens of countries on establishing an international coalition to protect Red Sea shipping from attacks by the Houthis. Yemen’s Houthis previously said last week that they targeted a Saudi oil tanker, claiming it crossed the group’s naval blockade despite prior warnings.

Riyadh might take matters into their own hands soon. Unnamed Yemeni sources told the Guardian preparations are underway for a “major [Saudi] military offensive” against the Houthis, which might include a land invasion of Central Yemen.

Why it matters: Saudi Arabia seems intent on owning Red Sea security rather than relying entirely on Western naval task forces, especially with the rising Houthi threats. The Kingdom aims to secure its alternative lung to Hormuz, which absorbed the majority of both oil and non-oil exports and trade since the strait’s closure, as well as establish a regional consensus on keeping key sea lanes open.

PIF’s EA acquisition heads for closing after EU approval

The largest leveraged buyout in history is set to close this week after clearing its final regulatory hurdle. The European Commission approved PIF’s USD 55 bn acquisition of Electronic Arts (EA) under the bloc’s Foreign Subsidies Regulation (FSR). EA told the US Securities And Exchange Commission in a filing that all required approvals were in hand as of 30 July, with the merger expected to close on or about the end of trading on 4 August.

The subsidies review was the harder of the two European tests. EU merger clearance came through last week, but the FSR, designed to prevent non-EU state subsidies from distorting acquisitions inside the bloc, was always the more scrutinized path for a sovereign-fund-led consortium. Two earlier Gulf acquisitions in Europe, Adnoc’s purchase of Germany’s Covestro and e&’s bid for parts of Czech operator PPF, cleared only after extended investigations and remedies. PIF’s passed without conditions.

The consortium: PIF, Silver Lake, and Jared Kushner’s Affinity Partners are acquiring EA through Oak-Eagle AcquireCo and Oak-Eagle MergerCo, the vehicles established when the merger agreement was signed in September 2025. EA survives as a wholly owned subsidiary.

The road to getting here: The consortium agreed in September 2025 to take EA private in the largest-ever leveraged buyout, backed by around USD 36.4 bn in equity, USD 20 bn in fully underwritten debt from JPMorgan, and PIF rolling over its existing 9.9% stake. Shareholders signed off on the move in December. JPMorgan placed USD 15 bn of the debt in March, drawing over USD 50 bn in orders. Efforts by a group of bondholders to block the financing failed.

Nahdi’s earnings slip on growth spending, while Bawan and SAL climb

Growth spending trims Nahdi Medical’s bottomline

Nahdi Medical’s 2Q net income fell 9.7% y-o-y to SAR 215.2 mn, even as revenue rose 5.8% y-o-y to SAR 2.7 bn, it said in a Tadawul disclosure. Gross net income rose alongside revenue, but the squeeze came further down, from the cost of expanding into healthcare and digital capabilities.

Healthcare fuels growth: Nahdi Medical’s core retail business grew a modest 4.1% in the quarter, but healthcare revenue jumped 36.9% y-o-y and regional expansion 24.6% — the segments Nahdi is investing in. That spending shows up as higher operating expenses, which weighed on operating gains and gross margins.

1H told a similar story, with net income down 8.6% y-o-y to SAR 450.9 mn while revenue was up 5.9% to SAR 5.47 bn.

Dividends: The company will distribute SAR 338 mn in dividends for 1H 2026, or SAR 2.6 per share, on 26 August, according to a separate disclosure.

Bawan’s oil and gas unit powers 2Q income surge

Bawan’s 2Q net income rose 68.9% y-o-y to SAR 53.9 mn even as revenue was near-flat at SAR 970.5 mn, it said in a Tadawul filing. Stronger oil and gas volumes and better selling prices across the plastics, metal, and wood units lifted margins, offset by weaker electrical-segment pricing.

The half went the opposite direction, and a one-off is why. Net income fell 41.5% y-o-y to SAR 105.9 mn on revenue up 6.7% to SAR 2 bn, as the year-earlier period included a SAR 126 mn noncash bargain-purchase gain from Bawan’s acquisition of an 80% stake in an oil and gas business. Excluding that, underlying 1H net income reached SAR 164 mn.

SAL Saudi Logistics Services saw 2Q earnings jump

SAL Saudi Logistics Services saw 2Q net income increase 18% y-o-y to SAR 191.4 mn, according to a Tadawul disclosure. Revenue climbed 30% y-o-y to SAR 512.1 mn, carried by the company’s cargo ground handling and logistics divisions.

The rebound in cargo volumes did most of the work. Cargo ground handling revenue rose 29.3% y-o-y as volumes recovered 9%, which the company tied to easing geopolitical disruptions to regional airspace and supply chains. Logistics revenue climbed an even faster 34.2% on expanded services, a broader customer base, and higher utilization across contract logistics and warehousing.

For 1H 2026, net income rose 10.4% y-o-y to SAR 348 mn, while revenue increased 23.1% to SAR 957.9 mn. 1H grew at a slower rate than 2Q because the first quarter included the tail end of the regional disruptions before volumes recovered in the second quarter.

Spinneys raises Saudi stake to 70%, Desaisiv launches AI ins. agent, Riyadh Air adds Kuala Lumpur

Dubai-based grocery retailer Spinneys has agreed to acquire an additional 20% of its Saudi subsidiary from Al Hokair Holding Group for SAR 18 mn, taking its holding to 70% from 50%, according to a press release (pdf). The transaction still needs regulatory clearance.

Insurtech Desaisiv opens USD 8 mn growth funding round

Saudi insurtech Desaisiv is raising USD 8 mn in a growth funding round to automate how Saudi companies buy and manage ins. through an AI platform, according to a press release. No investors have been named, and the round is still open.

About the company: Founded in 2023 by Mohammad Nabhan (LinkedIn) and Saed Khawaldeh (LinkedIn), Desaisiv manages a corporate ins. portfolio exceeding SAR 2 bn, using AI and automation to benchmark pricing, evaluate policy performance, and negotiate premiums.

What’s next: Desaisiv is targeting SAR 10 bn in premiums processed as it moves beyond corporate health into motor, leasing, and general ins.

Riyadh Air adds Kuala Lumpur to its destinations

Riyadh Air has begun direct flights to Kuala Lumpur, marking its debut in Southeast Asia, according to a press release. The airline will operate three direct flights a week between the two cities.

REMEMBER- The PIF-backed carrier has been expanding quickly, adding routes including Madrid, Cairo, Dubai, Malaga, and more since June. It has also ordered 34 Airbus and Boeing widebody aircraft as it targets a network of more than 100 destinations by 2030.

Central banks bought less gold in 1Q than initially estimated -WGC

Central banks recorded their lowest 1Q gold net purchases in over 15 years, after an initial estimate of 244 tonnes of purchases was revised down to a mere 57 tonnes, according to a World Gold Council (WGC) report picked up by the Financial Times.

The gap: The revision occurred after gold previously thought to be flowing to official channels was reclassified into the over-the-counter (OTC) category. Central bank disclosures on gold purchases only take place on a voluntary basis, and purchasing tracking is becoming increasingly opaque, especially when it comes to China — a big buyer that only discloses a portion of purchases.

The bigger picture: The new stat puts purchases at their lowest for a 1Q period in over 15 years, the report said. Purchases picked up in 2Q to reach 289 tonnes, marking a 5x increase compared to the first quarter, largely on the back of purchases by China and Poland. However, overall central bank demand was at its lowest 1H stat since 2022.

There’s also a geopolitical element: Gold purchasing reporting also became complicated following US sanctions on Russia in 2022, which drove developing economies to diversify away from the greenback, leading institutions to disclose far less to the IMF.

Major sovereign buyers now reveal only a fraction of their transactions, forcing analysts into a “game of cat-and-mouse” to trace actual physical flows, said John Reade, market strategist at the WGC.

Why Middle East capital is in the mix: Following regional conflict disruptions, several Middle Eastern sovereign wealth funds unloaded bullion reserves to offset declines in oil and gas revenue, according to Reade. Elsewhere, official institutions in Turkey, Russia, and Azerbaijan were net sellers during 1H.

Why the pullback: Central banks act as the gold market’s buyer of last resort, accounting for up to a third of global 2Q demand. When prices pull back, official sector buying typically absorbs excess supply, creating a hard floor under bullion. When its gold purchasing activity slows, this price floor supporting the global gold market starts cracking. This comes at a time when gold prices have already fallen by around 30% from January peaks.

What else weighs on the demand: Although 1H gold demand went up 2% y-o-y to 2.5k tonnes, momentum was weighed down by gold exchange-traded fund (ETF) liquidations, which saw outflows of 45 tonnes (USD 4bn) in 2Q alone.

TASI	10,590	+0.4% (YTD: +0.9%)
MSCI Tadawul 30	1,423	+0.8% (YTD: +2.6%)
NomuC	21,835	+0.3% (YTD: -6.3%)
USD : SAR (SAMA)	USD 3.75 Sell	USD 3.75 Buy
Interest rates	4.25% repo	3.75% reverse repo
EGX30	53,442	-0.4% (YTD: +27.8%)
ADX	9,915	+0.4% (YTD: -0.8%)
DFM	5,796	+0.1% (YTD: -4.2%)
S&P 500	7,490	+0.7% (YTD: +9.4%)
FTSE 100	10,868	-0.3% (YTD: +9.4%)
Euro Stoxx 50	6,358	+0.2% (YTD: +9.7%)
Brent crude	USD 87.93	+1.2%
Natural gas (Nymex)	USD 2.75	-0.4%
Gold	USD 4,107	-1.3%
BTC	USD 62,905	-0.1% (YTD: -28.2%)
Sukuk/bond market index	907.45	-0.2% (YTD: -1.3%)
S&P MENA Bond & Sukuk	149.83	0.0% (YTD: -1.4%)
VIX (Volatility Index)	15.99	-6.4% (YTD: +7.0%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.4% on Thursday on turnover of SAR 4.6 bn. The index is up 0.9% YTD.

In the green: Tadco (+10.0%), Saudi Paper Manufacturing (+7.1%), and Takween (+6.9%).

In the red: Tawuniya (-10.0%), Chemanol (-10.0%), and Riyadh Cement (-5.1%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.3% on Thursday on turnover of SAR 10.5 mn. The index is down 6.3% YTD.

In the green: DRC (+15.1%), Al Babtain Food (+9.9%), and Taqat (+9.5%).

In the red: Mulkia (-10.1%), Molan (-9.0%), and Lamasat (-6.8%).

CALENDAR

AUGUST

30 August-1 September (Sunday-Tuesday): Saudi Paper and Packaging Expo, Riyadh International Convention & Exhibition Center.

31 August-3 September (Monday-Thursday): Leap Tech Conference, Riyadh Exhibition & Convention Center - Malham.

SEPTEMBER

8-10 September (Tuesday-Thursday): The WTM Spotlight Riyadh, Riyadh Front Exhibition & Conference Center (RFECC), Riyadh.

15-17 September (Tuesday-Thursday) The Global AI Summit, King Abdulaziz International Convention Center, Riyadh.

23 September (Wednesday): Saudi National Day.

28 September-1 October (Monday-Thursday): The International Conference on Theory and Practice of Electronic Governance (ICEGOV), Prince Sultan University, Riyadh.

OCTOBER

25-26 October (Sunday-Monday): The Global Proptech Summit, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

26-28 October (Monday-Wednesday): ACHEMA Middle East, Riyadh International Convention & Exhibition Center.

26-29 October (Monday-Thursday): The Future Investment Initiative, King Abdulaziz International Conference Center, Riyadh.

28-29 October (Wednesday-Thursday): Procurement and Supply Chain Futures Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

28-29 October (Wednesday-Thursday): Real Estate Supply Chain Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

30 October-1 November (Friday-Sunday): The New Global Sport Conference, Sofitel Hotel & Convention Centre, Riyadh.

NOVEMBER

11-12 November (Wednesday-Thursday): Aluminum Arabia, The Arena, Riyadh.

16-19 November (Monday-Thursday): Cityscape Global, Riyadh Exhibition and Convention Centre (Malham), Riyadh.

29 November-1 December (Sunday-Tuesday): The UN Trade and Development Global Supply Chain Forum, Riyadh.

Signposted to happen sometime in 2026:

2H: Sabic’s USD 6.4 bn Fujian project in China to start production;
November: The Esports Nations Cup, Riyadh;
The World Economic Forum’s Global Collaboration and Growth Meeting, Jeddah;

2027

FEBRUARY

1-3 February (Monday-Wednesday): Energy Regulators Regional Association annual conference, Riyadh.

MARCH

21-25 March (Sunday-Thursday):The World Water Forum, Riyadh.

22–24 March (Monday-Wednesday): Capital Markets Forum, Four Seasons Hotel, Riyadh

APRIL

26-29 April (Monday-Thursday): World Energy Congress, Riyadh.

JUNE

1-3 June (Tuesday-Thursday): The Saudi Entertainment and Amusement Expo, Riyadh Front Exhibition and Conference Center.

Signposted to happen sometime in 2027:

The Ocean Race finishes in Amaala on the Red Sea;
Riyadh-Kudmi transmission line to be completed;
Aero Middle East and Sand & Fun takes place in Thumamah Airport, Riyadh.

Signposted to happen sometime in 2Q 2027:

The Hail Region Water Networks Project is expected to be completed.

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