Saudi Arabia — the world's largest crude oil exporter — faces a contraction in its economy this year, according to an IMF report released Tuesday, with drone and missile strikes launched by Houthi forces from Yemen compounding fiscal pressures that were already mounting from the wider regional conflict.

The IMF's latest World Economic Outlook report projects a 3.3 percent contraction in Saudi Arabia's economy, alongside a broader regional downturn tied to Iran's closure of the Strait of Hormuz. The fund's regional forecast projects a contraction of 0.3 percent for the year — a reversal from the 1.9 percent growth that forecasters had projected only six months earlier. The updated assessment factored in a more extended shutdown of the Strait of Hormuz than the April report had assumed, with a recovery projected for 2027 once the waterway was expected to resume normal passage.

Pressure on the kingdom had been building along the Strait of Hormuz — a passage through which substantial volumes of oil and gas move — following the outbreak of hostilities in the Middle East in February, after armed exchanges between the United States, Israel, and Iran. Hostilities in the region have been accompanied by a pattern of Iranian interference in Strait of Hormuz shipping, with vessels transiting the waterway reportedly targeted on multiple occasions when they lacked Tehran's clearance. Washington put in place its own counter-measures against Iranian port access while steadily expanding its naval escort operations for allied vessels transiting the waterway.

When Yemen's conflict resumed in July after a period of suspension, fighting between the Houthi movement and the coalition of Arab states backing the country's internationally recognised government spilled across the border, drawing the war onto Saudi Arabian territory. Strikes attributed to Houthi forces have reached petroleum infrastructure inside Saudi Arabia, vessels navigating the Red Sea — a waterway the kingdom relies on as an export corridor — and ground-based transit facilities such as airports.

The agreement had already been concluded when a series of drone and missile strikes on Riyadh's international airport on Saturday claimed 13 lives — a number that stood as the country's steepest single-incident death toll in more than a decade. Late on Monday, explosions were heard across the Saudi capital, with the coalition reporting that a Houthi-launched missile had been brought down while the group stated it had directed an attack at the airport, which has remained closed to traffic. A government-issued alert, delivered automatically to mobile phones that evening, warned of an airborne threat at a point when no interception had yet been officially confirmed.

Following the airport assault on Saturday, US President Donald Trump indicated he was considering direct participation in Saudi-led military operations against the Houthis — a departure from his earlier position, under which he had chosen not to join those efforts even when the kingdom had sought US involvement. Houthi political bureau member Mohammed Al Bukhaiti told AFP that the group would direct action against US interests across the region if Washington intervened. Bukhaiti framed the attacks on Saudi targets as a direct signal to the crown prince that directing military action against Yemen from a position of personal remove had become untenable.

Since Riyadh began providing armed support in 2015, Yemen's warring factions have remained locked in a prolonged conflict that has pushed much of the population — already living in poverty — toward worsening gaps in food supplies, healthcare access, and everyday services.

In its assessment, the fund placed Saudi Arabia at the lower end of regional export exposure, attributing that position to an economy whose trade channels extend across a broader range of destinations. Crude destined for the Red Sea coast travelled overland through the East-West pipeline, allowing shipments to move without passing through the Strait of Hormuz. The flow of oil through the pipeline came to a halt for a period in September, following strikes that officials linked to armed groups operating in Iraq with backing from Iran.