Saudi foreign investment drops during Iran war

• Net inflows fall to $5bn in Q2
• FDI ‘always lumpy’, says economist
• Future investment in AI hit

Foreign direct investment in Saudi Arabia dropped in the second quarter of this year as the war in the region disrupted trade.

Net inflows were down nearly 20 percent year on year to SAR19 billion ($5 billion), the lowest level since 2024, according to the General Authority for Statistics.

This covers a period in which the US and Israel launched a war against Iran, which led to a number of Gulf countries, including Saudi Arabia, being targeted with a barrage of missile and drone attacks.

Despite the drop, Monica Malik, chief economist at Abu Dhabi Commercial Bank, said it was encouraging that foreign direct investment (FDI) had “held up so well”.

The continued inflows could be in part down to deals struck following the outbreak of the conflict, she said, including investments in vital logistics and port infrastructure.

“It’s clear that a couple of key sectors are going to get a lot of investment in,” she said.

Saudi Arabia has a target of $100 billion in FDI inflows by 2030. This would require a tripling of inflows compared with last year.

The latest figures remain within normal fluctuation range for FDI, said Tim Callen, a fellow at the Arab Gulf States Institute in Washington and a former IMF mission chief to Saudi Arabia.

“FDI is always lumpy,” he said. “Recent FDI trends show no sign of increasing towards the Vision 2030 target, but equally little sign that the war has deterred FDI.”

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The conflict has threatened future investments in particular sectors, such as data centres and other artificial intelligence infrastructure, which have been targeted in specific attacks.

Saudi Arabia’s economy shrunk for the first time in three years in the second quarter of 2026. This was largely down to effects of the war, including disruption to shipping lanes that have pushed up the price of logistics and government spending on subsidies.

The International Monetary Fund is forecasting that the country’s real GDP growth will be 1.7 percent this year, compared to 4.6 percent in 2025.