Oil prices might not recover soon. Here’s what that means for Saudi Arabia’s ambitious transformation plans

Oil prices have dropped over tariffs and tensions within OPEC+. What does that mean for Saudi Arabia’s “giga-projects?”

Oil markets have slumped in recent weeks over fears of a trade war between the US and China and a surprise decision by OPEC+ countries to increase output in May. That could spell trouble for some oil-dependent Middle Eastern economies. On April 8, oil futures slid to a four-year low as investors priced in the possibility of a recession, driven tensions between the world’s two largest economies. Although prices have risen slightly since then, a bigger recovery may not happen soon. Goldman Sachs said on April 13 that it expects oil prices to decline through 2025 and 2026, with Brent crude averaging $63 a barrel for the rest of the year, and even lower next year. The next day, JP Morgan slashed its oil price forecasts to $66 for Brent in 2025, and a target of $58 for 2026. Lower oil prices are “bad news” for oil exporters in the Middle East and North Africa (MENA), says Tim Callen, a visiting fellow at the Arab Gulf States Institute in Washington. He adds that Saudi Arabia, Oman and Bahrain will feel the most pain, with countries like the United Arab Emirates, Qatar and Kuwait less affected. Of all Middle Eastern economies, Saudi Arabia’s is the “most vulnerable” to low oil prices, James Swanston, Middle East and North Africa Senior Economist at Capital Economics, told CNN. The country is the world’s top oil exporter. The commodity accounted for 60% of government revenue in 2024, with crude oil and natural gas accounting for more than 20% of the country’s GDP over the same period.