Saudi Arabia’s real gross domestic product increased 2.8% year-on-year in the first quarter, according to flash government estimates issued on Thursday. 

Non-oil activities rose 2.8% while oil-related activities grew 2.3% year-on-year, data by the General Authority for Statistics (GASTAT) suggested. 

However, seasonally adjusted real GDP for the first quarter decreased 1.5% on the previous quarter, driven by a 7.2% decline in oil activities, as the implications of the Iran-US war come into play. Government and non-oil activities grew 0.8% and 0.2% respectively. 

“Oil activities were the main contributor to the decline in seasonally adjusted real GDP, -1.7 (percentage points). Non-oil activities and government activities each contributed 0.1 (percentage points),” the report added. 

Gulf oil exporters directly affected by the war face steep downward revisions of up to 15 percentage points this year. The International Monetary Fund has lowered its GDP growth prediction for the kingdom for this year and next. 

The Saudi economy is now expected to expand 3.1 percent this year, down 0.9 percent from the IMF’s last review in October, and 4.5 percent in 2027, up 1.3% from its October’s forecast. 

On balance, Saudi Arabia is assessed to be less sensitive to price increase versus decline in volumes compared to other GCC economies such as Kuwait, the fund said in its latest review. Hence, a 10% increase in oil prices or a 10% decline in export volumes will impact the current account by slightly more than 1 percentage point.

Saudi Arabia activated its East-West Crude Pipeline at full capacity for the first time in its 40-year history in the wake of the US-Iran conflict. The petroline - that runs 1,201 kilometres connecting the Abqaiq oil field in the eastern province to Yanbu on the Red Sea coast, was built during the Iran-Iraq war in the 1980s. 

Saudi Aramco confirmed last March that it had increased the pipeline’s capacity to seven million barrels a day. Exactly a year later, the petroline reached its full operational capacity. 
 

Bond and sukuk issuances in the GCC reached $55.04 billion in the first quarter of 2026, marking a 5.6% increase year-on-year, according to data from Kuwait Financial Centre (Markaz).

The total was raised through 95 deals during the quarter, driven largely by government-backed issuances and continued investor demand for fixed income instruments across the region.

Saudi Arabia accounted for the largest share of issuances at $32.54 billion, representing 59.1% of the total market, followed by the United Arab Emirates at $13.57 billion, or 24.7%. Qatar contributed $4.2 billion, while Bahrain, Kuwait and Oman recorded $2.1 billion, $1.98 billion and $650 million respectively.

Government entities were the largest issuers during the quarter, raising $20.46 billion, followed by the financial sector at $19.45 billion. The energy sector accounted for $5.52 billion in issuances.

Conventional bonds made up the majority of issuances, reaching $35.89 billion, or 65.2% of the total, while sukuk issuances stood at $19.15 billion.

Large transactions played a significant role in overall volumes, with issuances exceeding $1 billion contributing $33.33 billion to the total.

The data reflects steady activity in the GCC’s fixed income market, supported by sovereign borrowing needs and sustained investor participation.

The United Arab Emirates will leave OPEC next month, its government said on Tuesday, ending decades of membership as it seeks greater flexibility to increase oil production during a period of geopolitical tension and market disruption linked to the Iran conflict.

The UAE, a member of the group since 1967 through Abu Dhabi, said the decision aligns with its long-term economic strategy and plans to expand energy investment. The move comes as oil markets face volatility and supply constraints, including disruptions to shipments through the Strait of Hormuz, a key transit route for global energy supplies.

“The U.A.E.’s decision to exit from OPEC reflects a policy-driven evolution aligned with long-term market fundamentals,” Energy Minister Suhail al-Mazrouei said in a social media post. “We thank OPEC and its member countries for decades of constructive cooperation.”

In a statement published by WAM, the government said leaving the group would provide greater “flexibility” and support its “long-term strategic and economic vision.” Officials added that constraints on shipping through the Strait of Hormuz mean the immediate market impact of the decision is likely to be limited.

The departure is expected to take effect on Friday and includes withdrawal from both OPEC and its wider alliance, OPEC+. The move reduces the group’s production capacity at a time when it has been managing supply to stabilise prices.

Before the current conflict, the UAE was producing about 3.6 million barrels of oil per day, accounting for roughly 12% of OPEC’s output, according to the International Energy Agency. Analysts say its exit could weaken the group’s ability to influence global markets over time.

Oil prices have risen sharply since the escalation of the Iran conflict, with Brent crude reaching as high as $119.50 a barrel. Prices were up 3.4%  on Tuesday at around $111.67.

The decision also highlights growing differences between the UAE and Saudi Arabia, OPEC’s leading member. The two countries have diverged on regional strategy and energy policy in recent years.

Tensions have intensified during the conflict with Iran. The UAE has faced repeated missile and drone attacks and has voiced dissatisfaction with the response from regional organisations. 

The UAE’s exit also aligns with broader criticism of OPEC from Donald Trump, who has accused the group of inflating oil prices and linked US security support for Gulf states to energy costs.

Despite leaving the group, UAE officials said the country would continue to increase production gradually, in line with demand and market conditions.

Middle East stock markets closed lower on Monday as rising tensions between the United States and Iran unsettled investors, amid concerns that a fragile ceasefire could collapse and disruptions in the Strait of Hormuz would persist.

Regional sentiment weakened after reports that Tehran rejected further negotiations with Washington, while the seizure of an Iranian cargo vessel by the U.S. added to uncertainty ahead of the ceasefire’s expected expiry.

Dubai’s main index fell 2.1%, ending a four-session rally, led by declines in property and transport stocks. Emaar Properties dropped 2.3%, while Salik Company fell 2.9%. Air Arabia closed 3% lower.

In Abu Dhabi, the benchmark index declined 0.8%, with Aldar Properties down 2.7%.

Saudi Arabia’s index lost 0.9%, weighed by a 1.2% fall in Al Rajhi Bank, while Saudi Aramco ended flat after early gains.

Elsewhere, Qatar’s index slipped 0.4%, with Qatar Islamic Bank declining 1.8%. Egypt’s benchmark index fell 1.1%, led by losses in Commercial International Bank.

Markets in Bahrain, Oman and Kuwait also recorded modest declines.

The ongoing conflict has disrupted energy markets, with traffic through the Strait of Hormuz largely suspended. Brent crude rose 4.8% to $94.75 per barrel as investors assessed supply risks.

Analysts said higher oil prices could provide some support to Gulf economies despite market volatility.

The conflict, now in its eighth week, has intensified concerns over regional stability. The United States has warned of further escalation, while Iran has threatened retaliation against regional infrastructure if tensions increase.

Reports also indicated that the United Arab Emirates has begun discussions with the U.S. on potential financial support mechanisms should the situation deteriorate further, although this could not be independently verified.

Investors are expected to remain cautious in the near term, with market direction closely tied to developments in the geopolitical situation and energy markets.

Pakistan has repaid $2 billion to the United Arab Emirates under maturing bilateral deposits, as the country navigates external financing pressures and debt obligations, a central bank official said on Saturday.

The repayment forms part of a broader $3.5 billion due to the UAE by the end of April, as authorities work to stabilize foreign exchange reserves with support from allied countries and an International Monetary Fund (IMF) program.

The outflow comes at a time when Pakistan’s reserves remain under pressure. As of March 27, foreign exchange reserves stood at $16.4 billion, covering roughly three months of imports. The repayment coincided with $1.4 billion in Eurobond obligations during the same period, highlighting ongoing strain on the country’s balance of payments.

To manage liquidity, Pakistan has relied on financial support from partner countries. Earlier this week, Saudi Arabia deposited $2 billion with the State Bank of Pakistan and agreed to extend the maturity of a separate $3 billion deposit, providing short-term relief to reserves.

Pakistan has also received financial backing from China and other partners as it works to meet conditions under its $7 billion IMF programme, which requires maintaining adequate reserve levels.

Officials have previously described repayments to the UAE as routine transactions under bilateral agreements, although they come amid tighter external conditions and ongoing financing needs.

Looking ahead, Pakistan is exploring a mix of funding options, including Eurobonds, Islamic sukuk, commercial borrowing and bilateral support, to manage upcoming repayments and maintain reserve stability.

Pakistan has raised $390 million through its first hybrid Sukuk issuance, the finance ministry said on Thursday, marking a new addition to the country’s Shariah-compliant debt instruments.

The Sukuk, issued through an auction process in collaboration with the State Bank of Pakistan, Pakistan Stock Exchange and Securities and Exchange Commission of Pakistan, combines two Islamic financing structures — Ijarah Sale and Lease Back (SLB) and Commodity Murabaha.

The hybrid Sukuk allocates 55% of proceeds to Ijarah SLB and 45% to Commodity Murabaha, providing a mix of asset-backed leasing and cost-plus financing structures.

The issuance included a one-year fixed-rate discounted Sukuk and a 10-year variable rental rate (VRR) Sukuk. The one-year instrument was priced at 11.80%, while the 10-year VRR Sukuk was set at 11.7185%.

According to the ministry, the offering attracted bids exceeding the target, with total subscriptions reaching 1.45 times the initial $718 million target.

Officials said the hybrid structure is expected to broaden investor participation and deepen Pakistan’s domestic Islamic debt market.

Khaliq Uz Zaman, director of domestic debt at the Finance Ministry, described the issuance as a milestone for the sector, adding that it could help diversify the investor base and support efforts to reduce borrowing costs over time.

Murabaha structures involve the sale of assets at a disclosed cost plus a profit margin, while Ijarah contracts involve leasing assets in exchange for rental payments.

The issuance comes as Pakistan continues to expand its use of Shariah-compliant instruments to meet government financing needs and develop its Islamic finance ecosystem.

Growth across the Middle East and North Africa region has bore the biggest brunt of the Iran conflict, significantly eroding regional output and progress. 

The MENA region’s growth is expected to slow down to 1.1% in 2026, from 3.2% last year, before recovering to 4.8% in 2027, as the region faces the most direct impact of the current war, the International Monetary Fund (IMF) has estimated. The region's 2026 growth forecast has been lowered by 2.8 percentage points from the fund's January projections. 

For commodity exporters directly affected by the conflict, diminished production and exports imply a severe downward revision of GDP growth projections for 2026, the fund said in its latest World Economic Output (WEO) update released this week. 

“The contraction of GDP growth for 2026 is therefore more pronounced for Bahrain, Iran, Iraq, Kuwait, and Qatar and less significant for Oman, Saudi Arabia, and the United Arab Emirates," the IMF said in its report. 

"For all these economies, growth in 2027 is expected to rebound, based on the assumption that energy production and transportation are normalized over the next few months - an assumption that may need to be revised if the duration of the conflict extends and the degree of damage suffered gets reassessed.”

The fund lowered estimates for Saudi Arabia’s GDP forecast for 2026 by 1.4 percentage point relative to January, to 3.1%, while revising it upward by 0.9 percentage point, to 4.5% for 2027.

Iran is among the worst hit countries in terms of downward growth revision, with its economy revised downward by 7.2 percentage points compared to IMF's January estimate, to -6.1% before rising sharply to 3.2% in 2027. 

In Egypt, growth is projected to slow to 4.2% in 2026 and recover to 4.8% in 2027, a cumulative downward revision of 1.1 percentage points.

"For commodity importers in the MENA, the terms-of-trade shock from higher commodity prices contributes to a somewhat modest downward revision of growth projections in 2026 and 2027, with some differentiation as a result of varying exposures to imports of energy, energy derivatives, and food items, as well as different economic trajectories before the conflict erupted," the report read. 

The fund has estimated global and regional growth under several operating scenarios. Under the assumption that the conflict will be relatively short-lived, global growth is expected to slow down to 3.1% in 2026 and 3.2% in 2027, down from 3.4% achieved last year. 

In case of a more protracted conflict, in which production and transport activities may take longer to resume than anticipated, the fund has taken two downside scenarios in consideration. 

In the adverse scenario - where oil prices would spike 80% and gas prices for Europe and Asia would rise 160% by the second quarter relative to the fund’s January baseline, as well as one-year-ahead inflation would soar by 50 basis points across advanced economies and 90 basis points in emerging markets by 2027 – global growth is estimated to drop to 2.5% in 2026 before rising to 3% next year. 

Global growth is estimated at 2% in 2026 and 2.2% in 2027 under a severe scenario in which oil prices would double while gas prices would rise 200% starting in the second quarter of 2026 relatively to the January WEO update baseline. Such a scenario would see one-year-ahead inflation spiking 100 basis points in advanced economies and 130 basis points in emerging markets by 2027. 

“The current hostilities in the Middle East pose immediate policy trade-offs: between fighting inflation and preserving growth and between supporting those affected by the rising cost of living and rebuilding fiscal buffers. Amid frequent global shocks, countries need to calibrate policies to ensure that they not only step up to the moment but also stand up to the next test,” the fund added.