Saudi Arabia has recorded its first quarterly contraction since the second quarter of 2024 and its steepest decline since the second quarter of 2020, as the US-Iran conflict continues to disrupted shipping activity and weigh on regional economies. 

Saudi’s gross domestic product slid 4.8% from April through June this year, driven by a 24.7% decline in oil activities, according to flash estimates issued by the kingdom’s General Authority for Statistics.

The oil sector slump and widespread implications of the regional conflict have triggered a sharp reversal from  3% growth logged in the previous quarter.   

Oil activities, which include extraction and refining of crude oil and natural gas, contributed negatively to real GDP growth by 5.4 percentage points. The overall decline was partially offset by a nominal rise in government (0.9%) and non-oil activities grew (0.6%).

Seasonally adjusted real GDP also decreased 4.9% quarter-on-quarter in Q2, led by a 21.5% slump in oil activities.

The estimate comes on the heels of the International Monetary Fund’s 2026 Article IV consultation report issued Wednesday, extoling the Gulf’s largest economy on its economic resilience during the current conflict, backed by strong fundamentals, diversified oil and logistics infrastructure. 

The IMF projected the kingdom’s economy to expand by 1.7% in 2026, against a 1.1% prediction in its World Economic Outlook report issued earlier this month. The fund’s growth projections for next year remained unchanged at 5.5%.

Saudi Aramco shuttered its 400,000-barrel-per-day Jazan refinery on July 27 following damage from an attack, according to a Reuters report.

The facility, which sustained damages to its integrated gasification combined-cycle complex and an oil storage area, is expected to resume operations by August 15.  

Aramco share price fell 1% on July 28, closing at 26.3 Saudi riyals, shedding 0.26 Saudi riyals per share from the previous day’s close of 26.56 Saudi riyals. 

Inflation is expected to rise modestly to 2.2%, the IMF has said, with higher shipping and insurance costs partly offset by subdued rent inflation and price caps on some fuel and food items. 

A modest reduction in the non-oil primary deficit is appropriate in 2026, it added, while backing fiscal consolidation and Vision 2030 reforms for sustained growth and diversification. 
 

The UAE's free trade negotiations with the European Union are advancing more slowly than talks with other partners, with the bloc's insistence on including non-trade issues identified as the key obstacle, the country's foreign trade minister has said.

The seventh round of negotiations with the EU has concluded, minister Thani bin Ahmed Al Zeyoudi said this week, adding that the EU's approach of linking trade deals to corporate sustainability reporting and labour standards "will not work with us." Several other countries, including the US, have raised similar objections to the EU's stance.

"The slow pace stems from the EU insisting on including non-trade matters," Al Zeyoudi said, a position that has drawn criticism from multiple trading partners engaged in separate negotiations with Brussels.

The comments came as Al Zeyoudi confirmed the UAE is continuing talks with at least 20 countries on comprehensive economic partnership agreements (CEPAs). Negotiations with Rwanda, Ghana and Zambia have reached their final stages, while talks with Bangladesh and Peru are making good progress.

The UAE has concluded 37 CEPAs to date, 18 of which are already in force. Non-oil foreign trade rose 13% year on year in the first half of 2026 to $517 billion, despite four months of geopolitical disruption stemming from the US-Israeli war with Iran. Non-oil trade with fully implemented CEPA partners reached $82.7 billion, including $52.8 billion in imports and $18 billion in non-oil exports.

Al Zeyoudi also said the UAE is working to develop logistics infrastructure and trade corridors to strengthen resilience against global supply chain disruptions.

The United States and Saudi Arabia have signed a civil nuclear cooperation agreement that would allow the kingdom to enrich uranium domestically and use American technology to develop its nuclear programme, in a deal that stops short of the safeguards typically required to prevent weapons proliferation.

The agreement, known as a 123 Agreement, does not include the gold-standard non-proliferation provisions found in comparable accords, nor does it require Saudi Arabia to adopt the International Atomic Energy Agency's additional protocol, which grants inspectors broader powers to investigate undeclared nuclear activity. The deal must pass a 90-day congressional review before entering into force.

The Department of Energy described the pact as a peaceful nuclear cooperation agreement that will create a decades-long, multibillion-dollar partnership. However, President Donald Trump cast doubt on its future shortly after signing, saying the deal would be conditional on Saudi Arabia joining the Abraham Accords to normalise ties with Israel — a step Riyadh has said it will not take without a credible roadmap to Palestinian statehood.

The agreement is understood to permit Saudi Arabia to enrich uranium domestically and reprocess spent nuclear fuel. Saudi Arabia has long maintained it will not sign the IAEA's Additional Protocol, citing national sovereignty — a position that analysts say aligns with the current US administration's scepticism of intergovernmental bodies.

Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, has previously stated that the kingdom intends to use its domestic uranium resources across the entire nuclear fuel cycle and ultimately export uranium products. Some experts question whether a nuclear programme is necessary given Saudi Arabia's existing energy assets.

The timing of the agreement raises additional questions as the US - Iran conflict, which was based on Trump's insistence on preventing Iranian nuclear weapons development, continues. 

Gulf states have explored nuclear energy for decades, but only the UAE has operationalised a plant. The Barakah facility in Abu Dhabi, which came online in 2020, now supplies around a quarter of the country's electricity, though a drone strike in May damaged an electrical generator just outside its inner perimeter.

Pakistan and China have agreed to expand cooperation in the livestock and halal meat export sectors, as Islamabad moves to capitalise on its meat production capacity and grow its share of the Chinese market.

The agreement was reached during a meeting between Pakistan Food Security Minister Rana Tanveer Hussain and a Chinese delegation. Both sides agreed to promote the establishment of modern slaughterhouses, meat processing facilities and export infrastructure in Pakistan, alongside improvements to cold chain systems and traceability mechanisms.

Pakistan exported meat — including beef, mutton and poultry — worth $512 million to China in fiscal year 2023-24, according to the country's statistics bureau. Total halal meat production stands at six million metric tons, with a significant portion available for export after domestic demand is met.

The bilateral push builds on policy groundwork laid in December last year, when Pakistan's prime minister approved a halal meat export strategy and directed authorities to draw up a three-year action plan targeting Muslim and global markets. The strategy includes regulatory reforms, disease control measures and upgraded slaughterhouse standards aligned with international requirements.

Private sector activity has already begun to reflect the opportunity. In September 2025, Karachi-based The Organic Meat Company Limited secured a $7.5 million order to export cooked frozen boneless beef to China, followed by an $8.1 million contract with Gold Crest Trading FZE for frozen boneless beef exports to the UAE.

Yemen's Houthi militia has declared a maritime blockade against Saudi Arabia, threatening to cut off a critical oil shipping route at a moment when the Strait of Hormuz is already severely disrupted.

The Iran-backed group announced the move in a televised address, framing it as retaliation for what it described as Saudi Arabia's "oppressive siege" on Yemen, including blockades on Houthi-held ports. "The Yemeni Armed Forces declare a maritime embargo against the criminal Saudi enemy, based on the equation of 'an eye for an eye', effective immediately," the group said.

With Bab al-Mandeb being Saudi Arabia's gateway to the Asian market, experts warn that the costs of forcing ships to reroute will be astronomical.

More than 7 million barrels of oil per day — around 7% of global trade — passed through Bab al-Mandab, the southern entrance to the Red Sea, in June, according to data from Kpler. EOS has identified five Saudi-flagged vessels in the Gulf of Aden heading towards the strait and another five moving down the Red Sea.

The blockade declaration compounds existing disruption to global energy flows. Before the US-Iran war began on February 28, around 20 million barrels per day — a fifth of the world's oil supply — transited the Strait of Hormuz. Traffic recovered partially after Washington and Tehran struck a preliminary deal in mid-June but has since slowed sharply following a new round of strikes across the Gulf. The Hormuz disruption had already pushed Saudi Arabia to increase exports via its Red Sea port of Yanbu, shipments that now face their own complications.

Crude futures, which briefly topped $90 a barrel on Monday, settled at $88.27 following the announcement, while the US West Texas Intermediate benchmark edged down to $82.11. Prices steadied after mediators put a proposal to Iran for a 10-day ceasefire aimed at reviving last month's interim deal.

The Houthi move comes days after the group fired missiles at Abha airport in southern Saudi Arabia, breaking a truce in place since 2022. The Houthis said the strike was a response to a Saudi bombardment of Sanaa airport.

Analysts said the announcement alone could have significant consequences regardless of whether ships are actually attacked. Most analysts believe that even if no ships were attacked in the Red Sea, the announcement alone is likely to disrupt shipping and create uncertainty.

The Houthis previously barred US, Israeli and UK ships from Bab al-Mandab in 2023, later expanding their targeting to vessels calling at Israeli ports. Saudi Arabia's blockade of Houthi-held Yemen, imposed in 2017, has been described by the United Nations as a contributor to severe humanitarian conditions in the country. Reports last week indicated that Tehran had asked the Houthi movement to stand ready to close the Red Sea if the US struck Iranian power infrastructure.

With the signing of the memorandum of understanding in June, the US war in Iran was expected to ostensibly wind down. It has not, and from recent developments, the situation is looking far worse than what one would have expected a few days earlier. 

Yahya Saree, spokesperson for the Yemeni Armed forces, announced a maritime embargo against Saudi Arabia, effectively immediately, asserting that the Bab al-Mandeb Strait will be closed to Saudi maritime traffic. 

The strait, which sat at the heart of the global shipping landscape, now finds itself at the centre of the headlines. 

What are the key things to know about Bab al-Mandeb and why does it hold relevance in the geopolitical chessboard?

• The Bab el-Mandeb Strait is a narrow martime chokepoint that connects the Red Sea with the Indian Ocean via the Gulf of Aden.

• It is a 20-mile-wide, 70-mile-long strait with the countries of Eritrea and Djibouti to the west and Yemen on its eastern edge. 

• It gain further prominence after the opening of the Suez Canal in 1869, enabling intercontinental sea trade between Asia and Europe through the Red Sea and the Mediterranean Sea. 

• The Strait owes its name to the perils of navigating the constricted waterway. The Arabic name Bab el Mandeb means Gate of Tears or Gate of Grief. 

• Bab el-Mandeb Strait accounts for about one-tenth of seaborne oil trade, making it the third busiest chokepoint in global oil trade after the Strait of Malacca and the Strait of Hormuz. 

• Bab al-Mandeb is essential to Asia-Europe trade as the alternate Cape of Good Hope route increases transport times, fuel consumption, carbon emissions and insurance premiums. 

• An average of 9.3 million barrels of crude oil and petroleum liquids transited the waterway each day in 2023, before slipping to 4.1 million barrels per day in 2024 and 4.2 million bpd in the first half of 2025, according to the US Energy Information Administration.

• The closure of Bab al-Mandeb along with a full blockade of the Strait of Hormuz could put a quarter of the world’s oil supply out of commission. 

Turkish exports to the Gulf region jumped 41% year on year to $2.6 billion in June, as easing conflict boosted demand and buyers turned to Turkey to replace goods previously sourced from disrupted Chinese supply chains.

Shipments to GCC member states alone topped $826 million, up 35%, according to data from the Türkiye Exporters Assembly (TIM). Saudi Arabia was the largest GCC buyer, importing $425 million of Turkish goods — a 117% year-on-year increase — followed by the UAE at $295 million and Kuwait at $34.7 million, marginally ahead of Qatar.

"We anticipate that, should lasting peace be secured, a much more positive picture will emerge in the second half of the year," said Mustafa Gültepe, TIM president, adding that the current growth rate could be maintained or increased in coming months.

The shift away from Chinese suppliers was a key driver of the increase. "Supplies from China to Gulf countries was largely halted with the war, so naturally they turned to us for goods," said Ayhan Zeytinoğlu, chairman of the Chamber of Industry in the northwestern province of Kocaeli. "While our export focus is Europe, the rise in June is good news, especially as some Gulf countries only started working with us over the past few years. In this current environment, we could be seeing monthly export revenues from the region increase further."

Jewellery was the single largest product category in GCC-bound shipments at $106 million, followed by chemical products at $69 million and pulses and cereals at $59 million.

The GCC figures were outpaced by Turkish exports to Iraq and Iran, which together accounted for more than $1 billion in June — up 26% and 64% respectively on the same month last year. For war-damaged Iran, metals, dried foods and chemical products were among the most in-demand Turkish goods.

Renewed hostilities, however, remain a risk. TIM's optimism for the second half of the year is conditional on a durable peace settlement, with the potential for conflict to again disrupt trade flows in the months ahead.

Indonesia is seeking to expand its exports to the Mediterranean and North African markets by exploring closer trade cooperation with Morocco.

The countries are exploring the establishment of a preferential trade agreement (PTA) to reduce tariff barriers and enhance the competitiveness of Indonesia's manufacturing industry, state-news agency Antara quoted Faisol Riza, deputy minister of industry as saying. 

"Morocco holds a strategic position as a gateway to North Africa and the Mediterranean region. We see significant opportunities to leverage this advantage to broaden market access for Indonesian industrial products while strengthening partnerships in future-oriented sectors such as aerospace, the halal industry, pharmaceuticals, and renewable energy," Riza added. 

The deputy minister met with Moroccan secretary of state for foreign trade, Omar Hejira, to explore ways to strengthen bilateral industrial cooperation and accelerate cooperation in the halal industry. 

This builds on a mutual recognition agreement commitment on halal certification signed between Indonesia's Halal Product Assurance Organizing Agency and the Moroccan Institute for Standardization in May 2026 to expedite the entry of Indonesian products into the Moroccan market without repetitive certification procedures. 

Indonesian exports to Morocco include vegetable oils, rubber and its products, footwear, textiles, machinery, and electrical equipment, as well as key commodities such as coffee, tea, and spices. Meanwhile, Indonesia imports fertilizers, aluminium, textiles, and various industrial raw materials from Morocco. Both nations have maintained relations since 1956.