Economy weathers geopolitical shock, but risks persist

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WHAT WE’RE TRACKING TODAY

THIS MORNING: BMI pencils in a 3.3% contraction for MENA in 2026

Good morning, wonderful people. The summer lull and the Iran conflict are taking a heavy toll on business in the region, with the news cycle grinding to a near halt as the “will-they-won’t-they” drama between Washington and Tehran unfolds.

We’re continuing the week with yet another issue led by a macroeconomic theme — this time it’s Moody’s view on the expected geopolitical shocks facing the Kingdom’s economy. Next, we examine the pivot in the Saudi league’s spending strategy as competition heats up.

BMI sees turbulence ahead

Fitch’s BMI is expecting the MENA economy to see a 3.3% contraction this year, downgrading its earlier forecast of 0.9%, Arab News reports. Hormuz remaining closed could stall the recovery in oil production and weigh on trade, investment, and service activities, BMI said.

Saudi Arabia remains somewhat insulated: The Kingdom could face a 1.3% contraction, better than forecasts in the double-digits for Qatar (12.4%), Iraq (19.4%), and Kuwait (20.6%). It’s still trailing the UAE at 0.3% growth, and Oman at 2.9%, the only GCC country expected to see meaningful growth in 2026.

Data point

SAR 72.3 bn — that was the total value of real estate transactions in 2Q, according to REGA’s official figures. The quarter saw 53.7k transactions, with residential land being the most active property type.

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The big story abroad

A few geopolitical fronts are leading the news cycle. Regional tensions flared after renewed Israeli strikes on Gaza and Lebanon killed 11 people, including, according to the IDF, senior Hezbollah commander Abu Hassan Alaa. Meanwhile, US envoys met with Egyptian, Turkish, and Qatari mediators in Cairo to discuss advancing Washington’s peace plan for Gaza.

Trump snubs Seoul in favor of Pyongyang? US President Donald Trump has instructed the Pentagon to “substantially reduce” an upcoming joint military exercise with South Korea on the basis that it would send a “hostile” message to North Korea. Trump also said Seoul had declined to help in the “denuclearization” of Iran.

Over in the business press: Financial infrastructure platform Stripe has signed up to buy OpenRouter — a unified API and marketplace — for over USD 7 bn, indicating a demand for the startup’s services that help firms switch between AI models. The final value of the acquisition could change, sources told Bloomberg.

Economy weathers geopolitical shock, but risks persist, Moody’s VP says

The Saudi economy entered a more complex phase in 2026, with recent data showing real GDP contracted 4.8% y-o-y in 2Q — marking its steepest decline since the fallout from the Covid-19 pandemic — amid regional disruptions that directly affected oil production and export flows. Meanwhile, forecasts from international institutions don’t point to a prolonged economic crisis, but rather to a temporary shock that could be followed by a strong recovery if geopolitical tensions ease and energy and trade flows return to normal. We spoke to Moody’s Vice President Aurelien Mali about how the crisis will take shape in the coming months. Edited excerpts from our conversation:

E: Do you believe international investors increasingly view Saudi as a relative haven within the region, or do geopolitical risks continue to outweigh the investment potential?

Aurelien Mali: On balance, international investors appear to view Saudi Arabia as a relative haven within the Gulf during the current crisis, provided there is no renewed regional escalation or significant damage to major oil, gas, or civilian infrastructure. This reflects comparative resilience rather than immunity, and the premium would likely erode if geopolitical and disruption risks persist.

Saudi Arabia has proven relatively less dependent on the Strait of Hormuz than its Gulf peers — unlike Qatar, Bahrain, or Kuwait, it can reroute a substantial share of crude westward via the East-West pipeline to Yanbu on the Red Sea, preserving meaningful export capacity through the crisis.

But this resilience is partial and likely temporary. The Red Sea alternative merely shifts chokepoint risk toward the Bab Al Mandeb Strait and the Houthi threat, pipeline pumping stations remain exposed to attack, and terminal throughput caps the volumes that can realistically be diverted. Saudi Arabia’s export optionality is therefore a real credit differentiator versus Hormuz-locked sovereigns, but its buffer would erode the longer the conflict persists, especially in a scenario of renewed escalation.

E: Do you expect the Kingdom to accelerate investment in alternative energy and export infrastructure?

AM: The current conflict is likely to encourage further investment in alternative trade routes across the region, including possible expansion of Petroline and Yanbu capacity, reinforcing the Kingdom’s relative position in the Gulf. Vision 2030 should also continue to support diversification into non-oil revenue, renewables, and downstream activities, although fiscal pressures and competing gigaproject commitments may constrain the pace.

E: Can you tell us about Moody’s outlook for the Saudi economy?

AM: The stable outlook on the Kingdom’s Aa3 ratings reflects Moody’s expectation that Saudi Arabia's credit profile will remain resilient to the ongoing regional conflict. This is supported by the country’s established alternative routes for its oil exports and its large fiscal buffers, which we estimate at 18% of GDP in 2025.

At the same time, Saudi Arabia's exposures to hydrocarbon sector volatility and to regional geopolitical risks are likely to persist for the foreseeable future. Risks around our baseline remain broadly balanced. Further progress in implementing large diversification projects may crowd in private-sector investment and accelerate the development of the non-hydrocarbon economy.

However, the regional conflict is likely to delay parts of this diversification agenda. A large and durable decline in oil prices in the medium term could intensify the trade-off between advancing economic diversification and maintaining fiscal prudence, potentially leading to a weaker sovereign balance sheet than we currently expect.

E: Which sectors do you expect to drive growth, which are most vulnerable to a slowdown, and why?

AM: Non-oil activity will likely remain Saudi Arabia’s main growth engine, led by services such as tourism and hospitality, entertainment, finance, logistics, and construction, particularly those supported by PIF investments. However, a prolonged regional conflict or escalation could weigh on these sectors.

The economy is also not yet fully decoupled from hydrocarbons. Fiscal funding, domestic demand, and investment still depend significantly on oil revenue and public spending. Over the medium term, carbon transition risks remain a key vulnerability.

Higher oil prices have largely offset lower export volumes in 1H, helping support Saudi Arabia’s public finances and limiting the impact on government revenue, even with some lag. This situation has allowed the government to avoid leaning heavily on its financial assets to support its budget.

Why Salah said no to the SPL

The Saudi Pro League is learning to live within its means — and its rivals are cashing in. Saudi clubs cut their summer transfer spending nearly in half y-o-y as the league ties recruitment funding to sporting and commercial performance and clubs under the Public Investment Fund's (PIF) control come under tighter budget discipline. Turkey’s Super Lig and the US’ Major League Soccer are moving into the space the Kingdom is vacating, picking up the marquee names that once defaulted to Riyadh and Jeddah. Mohamed Salah’s decision to take his final act to Trabzonspor rather than the SPL is the clearest sign yet that the league’s pull on the game's biggest stars has limits.

REMEMBER- The PIF placed tighter financial controls at Al Nassr after the club's debt topped SAR 800 mn. Al Nassr is one of the fund's Big Four SPL clubs, which together face budget cuts of USD 200-400 mn as the PIF tightens spending. Club boards are assembling litigation teams ahead of next season, bracing for contract disputes with players whose salaries can no longer be met in full.

Where do we stand so far?

The league is cheaper to run, but worth more: The SPL's aggregate player market value rose 7.7% y-o-y to some EUR 1.18 bn at the start of the season, ranking 11th worldwide, according to Transfermarkt data. Al Hilal tops the domestic table at EUR 221.7 mn (62nd globally), a whisker ahead of Al Ahli at EUR 220 mn (63rd). Al Ittihad is third at EUR 151.5 mn (87th), followed by Al Qadsiah at EUR 143.3 mn (90th) and reigning champion Al Nassr at EUR 137.2 mn (93rd).

The spending tap, meanwhile, tightened sharply: Summer transfer outlays fell 47.7% to EUR 222 mn from EUR 421 mn a year earlier, leaving the SPL eighth globally for transfer-market activity. What spending occurred was heavily concentrated at the top: Al Hilal and Al Ahli accounted for 67% of the total, while six clubs — Al Hilal, Al Ahli, Al Ittihad, Al Nassr, Al Qadsiah, and Al Diriyah — made up more than 97%.

The buys the league did make were targeted: Al Hilal signed winger Crysencio Summerville from West Ham United, making him the league’s most valuable player, while Al Ahli brought in Francisco Trincao from Sporting. Al Qadsiah landed Manchester City midfielder Tijjani Reijnders, and newly promoted Al Diriyah added former Everton midfielder Idrissa Gueye. Notice the pattern: these are players in or near their prime, bought to hold value, not end-of-career trophy signings.

Behind the numbers

A new funding formula is doing the rationing: The league overhauled how its Player Acquisition Center of Excellence (PACE) program allocates recruitment funding, moving to a second phase that pegs money to performance. Under the new model, only 22% of funds are split equally among clubs, with 22% tied to sporting results, 28% to television viewership, and 28% to commercial performance. The league is framing the shift as graduating from market-building to governance: Phase one — which it credits with a 221% rise in clubs’ aggregate market value and a 353% jump in combined club and commercial revenues since 2023 — established the market; phase two makes clubs earn their allocations.

Other one-offs also weighed on the numbers: The season kicked off some 15 days earlier than usual, compressing the window, while attention (and budgets) shifted toward the 2026 World Cup. Meanwhile, last summer’s exceptional spending set a high base for comparison.

Our take: The SPL is being folded into the same capital-discipline logic now governing the Kingdom's gigaprojects. Rising fiscal pressures limit Riyadh's appetite for spending with limited returns — particularly with geopolitical headwinds still stressing the economy — and the state is already trimming megaproject outlays to prioritize essential infrastructure for the 2034 World Cup and Expo 2030. Phase one of the SPL project bought global relevance with open cheques. Phase two has to prove there's a business underneath.

Turkey and the US are filling the void

The Super Lig had the summer the SPL used to have: Mohamed Salah joined Trabzonspor, Mason Greenwood moved to Fenerbahce for some EUR 39 mn, and Dusan Vlahovic signed for Besiktas — joining a league that already counts Victor Osimhen, Leroy Sane, and N’Golo Kante. Turkey is also chasing the hosting business: Istanbul will host the 2027 Spanish Super Cup on 2-7 February.

MLS is capitalizing on its World Cup moment: Antoine Griezmann joined Orlando City, Robert Lewandowski moved to Chicago Fire, Casemiro signed for Inter Miami, and Alexis Sanchez landed at CF Montreal. The league is riding the US’ post-2026 World Cup emergence as a major football market, staging its All-Star Game and the Leagues Cup alongside the regular season.

Salah is the case study in what the SPL just lost: With every major title won at Liverpool and no appetite to wear another English club’s shirt, the sporting options largely leveled out for the Egypt captain — leaving the financial package as the deciding factor, MBC football analyst Ahmed Ezz tells EnterpriseAM. The SPL was the natural Arab destination, with his name long linked to a league fielding Ronaldo, Benzema, and Kante. He passed.

“Salah chose not to play outside Europe in his final seasons — keeping his image framed within Europe in the eyes of the Arab world,” Ezz says. Turkey pays money comparable to a US move, he argues, “but with more authentic football crowds, far more devoted to their teams.” That’s the same pitch that convinced Victor Osimhen to commit to Galatasaray despite interest from title-contending clubs in England and Italy.

Proximity to Egypt sealed it: A lighter physical load than Liverpool demanded lets Salah conserve energy for national-team duty as he chases the Africa Cup of Nations still missing from his trophy cabinet after Egypt's strong 2026 World Cup run.

And Turkey gets the branding win: “Mohamed Salah’s decision to join Trabzonspor wasn’t on anyone's agenda,” The Athletic's football analyst Ahmed Walid tells us. The club keeps him in European competition — Trabzonspor features in the 2026-2027 Europa League — on high wages, “which is important considering that this is probably his last paycheck,” in a league competitive enough to matter.

The kicker cuts directly at the SPL: “Salah’s arrival makes him the definite superstar of the league, rather than being behind Cristiano Ronaldo or Lionel Messi,” Walid tells us.

The gist: The galaxy of stars Riyadh assembled is now, paradoxically, a recruiting handicap for players who want top billing.

Looking ahead, restructuring and private capital will play a bigger role

Expect a bumpy adjustment in the mid-table: The revised PACE model puts the most pressure on mid-tier and financially stretched clubs, which will need to control wages, sell players, or restructure costly contracts — the same squeeze already sending club boards lawyering up for disputes with players they can no longer pay in full.

That pressure should also accelerate the push for private capital: The PIF's sale of 70% of Al Hilal to Kingdom Holding offers an early template for how ownership could evolve as the league works to wean itself off state funding.

Qassim Cement lands loan from SIDF, BinDawood bids for Estonian assets

Qassim Cement lands SAR 400 mn facility from SIDF

Qassim Cement secured a SAR 400 mn financing agreement from the Saudi Industrial Development Fund (SIDF) to support its plan to launch a fourth production line and replace older ones, according to a Tadawul disclosure. The nine-year facility includes a two-year grace period followed by seven years of repayments. Qassim aims to combine this funding with shariah-compliant bank facilities to meet its funding needs.

REMEMBER- The company previously awarded a USD 298 mn (SAR 1.1 bn) contract to Sinoma International to build a fourth production line at its Buraydah facility, with an estimated daily capacity of 10k tons. Sinoma will build the production line under an EPC contract within two years.

BinDawood locks in bid for Estonian dairy assets

BinDawood eyes European expansion: BinDawood Holding’s wholly owned subsidiary JUUST & JUBN OÜ secured a bid to acquire the dairy production assets of Estonia’s AS E-Piim Tootmine for EUR 135.25 mn, according to a Tadawul announcement.

The details: The assets include real estate, operating assets, contractual rights, and equity stakes, with operations in Paide and Põltsamaa. E-Piim has an estimated 15% share of Estonia’s cheese market, ranking fourth domestically.

ALSO- BinDawood expects the transaction to have a positive financial impact in the medium to long term, especially after reporting a slight improvement in 1H. The company’s net income edged up to SAR 119.7 mn from SAR 119 mn a year earlier, while its revenue rose 9.7% y-o-y to SAR 3.45 bn.

Why African local-currency debt is the year’s best EM story

African local-currency debt is having the best year in EM fixed income. Bond markets across the continent have returned 5.5% year-to-date versus 3.2% for broader emerging-market peers, with demand so strong that current supply cannot satisfy investor appetite, Vontobel Asset Management Portfolio Manager Carlos de Sousa said in a Bloomberg report published Thursday.

The country-level dispersion tells the actual story. Zambia’s local ZMW-denominated bonds have delivered a 36% return YTD in USD terms — more than any other emerging market Bloomberg tracks, per Citi’s late-July call. Nigerian government bonds are yielding around 21%, Ugandan bonds 16%, Zambian bonds 18%. Real yields across the continent’s high-yield names sit at some of the most attractive levels globally, backed by IMF programs, fiscal resets, and — in the cases of Nigeria, Ghana, and Zambia — structural reforms that have moved from theory to execution.

Why does this matter for Gulf SWFs? The LP base sitting on 2H 2026 EM debt deployment mandates has a clean alternative to hard-currency EM sovereign bonds that doesn’t require wagering on the Fed cycle. PIF, Mubadala, Adia, and QIA have historically anchored their EM debt exposure through USD-denominated sovereign paper — a trade that has become structurally harder to price under a Warsh Fed that shows no signs of cutting. African local-currency debt sidesteps the trade entirely. The returns come from local rates and currency appreciation against a softening greenback, not from spread compression on Fed easing that isn’t coming.

The trade also produces something the hard-currency market has struggled to offer this year — real returns commensurate with real risk, priced by domestic markets rather than mediated through the global USD liquidity cycle. WisdomTree’s analysis shows local-currency EM debt has surged toward 20% returns in early 2026, outpacing hard-currency peers closer to 15%, reversing a decade-long pattern in which USD-denominated EM debt outperformed by a wide margin.

Egypt is not excluded from this trade by geography — it is excluded by its own market structure. EGP-denominated debt yields sit in the same 15-20%+ tier as Ghana and Nigeria, but foreign investors buying Ghanaian or Zambian local-currency debt can generally sell and convert back to the greenback in normal conditions. In Egypt, that round-trip has been repeatedly disrupted by FX rationing, USD queues, and periodic sharp devaluations. That history means institutional investors typically cap their EGP allocations at a fraction of what they would deploy in an African peer with the same nominal yield.

Egypt’s Eurobond window — previously estimated at a clean 8-11% yield — was shut in the spring on the assumption of a Fed cut cycle that markets have since pushed further out. With CME FedWatch now showing a 64% probability of a September hold at 3.5% and no cuts priced through year-end, the pricing window needed hasn’t reopened.

The bottom line: African local-currency debt is the trade of the year in EM fixed income, and it is a trade that runs entirely outside the Fed cycle logic since April CPI. For Gulf SWF LPs deploying into 2H, the question is no longer where the yield is — it is whether their EM debt mandate allows them to take it in ZMW, NGN, and UGX rather than USD.

(** Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

MARKETS THIS MORNING-

Asian markets showed little activity this morning, with Japan’s Nikkei dropping around 0.1%. MSCI’s broadest index of Asia-Pacific shares, excluding Japan, remained flat. South Korea’s stock market is closed today due to a national holiday.

TASI	10,920	+0.9% (YTD: +4.1%)
MSCI Tadawul 30	1,469	+1.0% (YTD: +5.9%)
NomuC	21,669	-0.7% (YTD: -7.0%)
USD : SAR (SAMA)	USD 3.75 Sell	USD 3.75 Buy
Interest rates	4.25% repo	3.75% reverse repo
EGX30	55,855	+1.1% (YTD: +33.5%)
ADX	10,047	+0.0% (YTD: +0.6%)
DFM	5,886	-0.4% (YTD: -2.7%)
S&P 500	7,786	-0.2% (YTD: +13.7%)
FTSE 100	10,750	-0.2% (YTD: +8.2%)
Euro Stoxx 50	6,540	-0.1% (YTD: +12.8%)
Brent crude	USD 88.52	+1.7%
Natural gas (Nymex)	USD 2.73	+0.2%
Gold	USD 4,437	+0.4%
BTC	USD 62,912	-0.4% (YTD: -28.2%)
Sukuk/bond market index	908.41	+0.0% (YTD: -1.2%)
S&P MENA Bond & Sukuk	151.07	-0.1% (YTD: -0.5%)
VIX (Fear gauge)	14.90	-1.7% (YTD: -4.7%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.9% yesterday on turnover of SAR 3.4 bn. The index is up 4.1% YTD.

In the green: Naseej International Trading (+10.0%), Raydan Food (+10.0%), and Tihama Advertising, Public Relations and Marketing (+7.3%).

In the red: Saudi Enaya Cooperative Ins. (-6.3%), Al Kathiri Holding (-3.7%), and Tamkeen Human Resource (-3.2%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.7% yesterday on turnover of SAR 10.0 mn. The index is down 7.0% YTD.

In the green: Horizon Educational (+7.0%), Riyadh Steel (+6.0%), and Mayar Holding (+5.4%).

In the red: Basma Adeem Medical (-14.0%), Arabica Star (-9.9%), and Al Kuzama Trading (-8.4%).

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.

29 November-1 December (Sunday-Tuesday): The Global Logistics Forum, King Abdulaziz International Convention Centre, 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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Economy weathers geopolitical shock, but risks persist

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Economy weathers geopolitical shock, but risks persist, Moody’s VP says

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Economy weathers geopolitical shock, but risks persist

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THIS MORNING: BMI pencils in a 3.3% contraction for MENA in 2026

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Economy weathers geopolitical shock, but risks persist, Moody’s VP says

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Why Salah said no to the SPL

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Qassim Cement lands loan from SIDF, BinDawood bids for Estonian assets

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Why African local-currency debt is the year’s best EM story

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