Forecasters still see Saudi inflation contained through 2027 despite regional escalation

The forecasters who model Saudi inflation expect the regional escalation to leave it largely intact. Oxford Economics and S&P Global Market Intelligence both see price growth contained through 2027 — Oxford at 2% for 2026 and 1.8% for 2027, S&P expecting inflation “broadly contained through 2027” — on the strength of the same buffers we flagged when August’s 1.8% reading landed: administered fuel and electricity prices, the SAR’s peg to the USD, and competition fierce enough to keep firms from passing on higher input costs.

The headline stays low because policy caps the two channels that usually do the damage. “Headline inflation has remained low because administered fuel and utility prices limit pass-through from oil-market volatility, while softer goods inflation offsets housing pressures,” Ralf Wiegert, head of MENA economics at S&P Global Market Intelligence, tells EnterpriseAM. The SAR’s peg to the USD does the rest, capping imported inflation, Oxford Economics lead economist Akanksha Samdani tells us — which is why food inflation ran at just 1.4% in August and the August PMI showed elevated input costs but competition holding pass-through in check.

Housing is still the one domestic pressure that won’t quit, and its 0.8-percentage-point contribution to the headline understates the squeeze on renters. Housing and utilities inflation ran at 3.9% in August — down from 4.2% in July, but more than twice the headline rate. “CPI reflects average cost-of-living changes, but housing costs are rising faster than overall inflation,” Wiegert says. Renters in the major cities feel it most, Samdani adds, and the lever to watch is Riyadh’s rent freeze, which Oxford Economics expects to slow rental inflation over the coming quarters.

Two channels the August data didn’t capture could still add pressure. The first is financing costs: senior analyst and economist Mohamed Hasanain points to recent Fed and Saudi rate increases, which lift borrowing costs for households and for businesses funding inventory and development. The second is delayed pass-through from the shipping and ins. costs that have spiked since the escalation. Wiegert expects some of it to reach imported goods, though he predicts businesses will absorb part of the hit, with solid demand heading off a broad acceleration. The gap between wholesale and consumer prices suggests they already are: wholesale inflation hit 4.6% in August against 1.8% at the consumer level, Samdani notes.

Looking ahead: Oxford Economics expects inflation to edge up slightly over the coming months, though not sharply. Further out, the call rests on a short list of variables — rents, how quickly shipping routes normalize, whether administered energy prices hold, and how long the disruption runs. Oxford’s 1.8% call for 2027 assumes rents stay the main driver and a growth rebound keeps them rising, tempered by the Riyadh freeze; Samdani's upside risks are continued rent increases, higher freight and imported-input costs, and prolonged disruption to regional trade routes.