Saudi Arabia is seeking at least $8 billion in new loans as the Iran war disrupts trade, damages energy infrastructure and strains the Saudi economy despite higher oil prices
Saudi Arabia is exploring plans to raise at least $8 billion through a new loan as the kingdom confronts the widening economic consequences of the regional war with Iran, according to people familiar with the discussions.
The potential borrowing would mark the latest sign that Riyadh is accelerating its search for alternative sources of financing as war-related disruptions collide with the enormous costs of Crown Prince Mohammed bin Salman’s economic transformation agenda.
Saudi Arabia’s National Debt Management Center, the government body responsible for managing sovereign borrowing, has begun approaching banks about a possible transaction, according to people who spoke to Bloomberg News on condition of anonymity because the discussions are private.
Saudi Aramco, the state-backed oil giant and the world’s largest energy company by market capitalization, is also holding separate discussions with banks about potential financing, some of the people said.
Both transactions remain at an early stage and could ultimately fail to materialize.
Representatives of the National Debt Management Center, which operates under the Finance Ministry, were not immediately available for comment. Aramco declined to comment.
The outreach nevertheless underscores a broader financial recalibration underway in Saudi Arabia, where policymakers are increasingly turning toward private lenders, international debt markets and asset sales to sustain the kingdom’s ambitious spending plans.
War disrupts the kingdom’s economic calculations
The search for fresh capital comes as Saudi Arabia and other Gulf states absorb the economic fallout from the continuing regional conflict.
The war has disrupted commercial traffic through the Strait of Hormuz, one of the world’s most important energy chokepoints, raising transportation costs and complicating supply chains across the Gulf.
Saudi Arabia has faced additional pressure on several fronts.
Iran has targeted Saudi energy infrastructure, according to the Bloomberg report, while the Iran-backed Houthi movement has threatened commercial shipping in the Red Sea.
That combination has complicated one of Riyadh’s principal strategies for reducing its exposure to disruptions in the Strait of Hormuz: redirecting oil exports through infrastructure connected to the kingdom’s western coast.
The result has been an economic shock extending beyond the battlefield.
Saudi Arabia’s economy recorded its steepest contraction since the coronavirus pandemic during the second quarter, with attacks and disruptions contributing to a nearly 25 percent decline in the kingdom’s oil sector, according to the report.
The deterioration illustrates the vulnerability of an economy still heavily dependent on energy revenues even as the government pours hundreds of billions of dollars into efforts to diversify beyond oil.
Higher oil prices offer limited relief
The conflict has also produced a financial paradox for Riyadh.
While attacks and maritime disruptions have damaged parts of the Saudi economy, the war has simultaneously pushed global oil prices higher.
Benchmark Brent crude has averaged about $87 per barrel this year, Bloomberg reported, providing the kingdom with a significant revenue cushion.
Higher crude prices have traditionally strengthened Saudi public finances, allowing the government to fund major infrastructure programs and reduce pressure on its budget.
But the additional revenue has not eliminated the kingdom’s fiscal challenges.
Saudi Arabia recorded a second-quarter budget deficit of 34.3 billion riyals, or about $9.1 billion, according to the report.
The deficit highlights the scale of the kingdom’s financial commitments at a time when Riyadh is simultaneously funding military and security requirements, maintaining social spending and pursuing some of the world’s most expensive development projects.
“Saudi Arabia is not simply borrowing because it lacks access to oil revenue,” the emerging picture suggests. “It is borrowing because the scale of its strategic and economic ambitions increasingly exceeds what traditional budget financing can comfortably support.”
That reality has driven the kingdom toward a more diversified funding model.
From bonds to private loans
The National Debt Management Center said in May that it had already completed its annual borrowing plan and secured roughly 90 percent of its expected financing requirements.
At the time, officials said that any additional funding needs would primarily be met through private financing channels and domestic markets.
The reported discussions over a new multibillion-dollar loan appear consistent with that strategy.
Saudi Arabia has already become one of the most active sovereign borrowers among emerging markets.
The kingdom has raised approximately $6 billion through domestic and international bond sales this year, while Saudi Aramco has raised another $4 billion, according to Bloomberg.
The kingdom’s Public Investment Fund, Saudi Arabia’s sovereign wealth fund, raised $7 billion in May in one of the first major public-market transactions following the outbreak of the Iran war.
Late last year, the National Debt Management Center also secured a $13 billion, seven-year syndicated loan — an unusually large private financing arrangement that signaled Riyadh’s growing willingness to look beyond conventional bond markets.
The transaction reflected a strategic shift.
Rather than relying primarily on oil revenues and sovereign bond issuance, Saudi Arabia is increasingly building a broader financing architecture involving commercial banks, private lenders, asset sales and partnerships with outside investors.
Vision 2030 meets the realities of war
The financial adjustment is closely tied to Vision 2030, Crown Prince Mohammed bin Salman’s sweeping program to transform Saudi Arabia into a more diversified economy.
The strategy has produced enormous investments in tourism, infrastructure, technology, sports, entertainment, artificial intelligence and advanced manufacturing.
But those ambitions require extraordinary amounts of capital.
Saudi Arabia has begun recalibrating spending on several mega-projects as officials confront the rising cost of maintaining multiple developments simultaneously.
Even so, the kingdom has continued to invest aggressively abroad.
Saudi Arabia recently committed €6 billion, or approximately $7 billion, to build a theme park complex near Paris, adding to a growing portfolio of international investments spanning gaming, technology and electric vehicles.
The contrast illustrates the balancing act facing Riyadh.
At home, the government is attempting to control spending and prioritize projects. Abroad, it remains determined to use its financial resources to build global influence and secure long-term strategic investments.
The war has made that balance more difficult.
Aramco and the privatization push
Saudi Aramco has emerged as another important component of Saudi Arabia’s evolving financing strategy.
Bloomberg has previously reported that the oil giant is pursuing a broader privatization plan that could eventually raise as much as $35 billion.
The company has also said it intends to remain active in global debt markets and explore new financial instruments capable of attracting a wider range of investors.
For Riyadh, Aramco represents far more than an energy company.
It is one of the kingdom’s most valuable financial assets — and potentially one of its most important sources of capital as Saudi Arabia attempts to finance an increasingly expensive economic transformation.
The government has repeatedly used Aramco dividends and share sales to support state finances and fund strategic investment programs.
A further expansion of private-sector participation in Aramco could therefore provide Riyadh with another avenue for raising capital without relying exclusively on sovereign borrowing.
Public Investment Fund shifts toward private capital
A similar transformation is underway at the Public Investment Fund, Saudi Arabia’s approximately $900 billion sovereign wealth fund.
Under its new five-year strategy, the PIF is preparing to accelerate efforts to transfer mature assets to private investors, pursue public listings and sell selected holdings.
The fund is also expected to rely increasingly on outside capital.
The strategy represents an important evolution for the institution, which has become the primary financial engine behind many of Saudi Arabia’s most ambitious projects.
For years, the PIF operated largely as a vehicle for deploying Saudi state capital.
The next phase increasingly involves attracting private money to projects that have already received substantial public investment.
That shift reflects a growing recognition in Riyadh that the state cannot indefinitely finance every component of Vision 2030 on its own.
Instead, Saudi Arabia is seeking to use government funds to build projects to a stage where private investors are willing to assume a greater share of the financial burden.
A new era of financial pragmatism
The reported $8 billion loan discussions therefore represent more than a single borrowing transaction.
They offer a glimpse into the changing financial model emerging in Saudi Arabia.
The kingdom remains one of the world’s largest oil producers and possesses substantial financial reserves. Higher crude prices have provided an important buffer against the immediate effects of war.
Yet Riyadh is simultaneously confronting disruptions to energy infrastructure, instability along vital maritime routes, rising supply-chain costs and the extraordinary financial demands of its domestic transformation.
The response appears increasingly pragmatic.
Saudi Arabia is borrowing more. It is selling assets. It is encouraging private investment. Its sovereign wealth fund is preparing divestments. And Aramco is exploring new sources of capital.
For Mohammed bin Salman and his government, the challenge is no longer simply how to spend the kingdom’s oil wealth.
It is how to leverage that wealth — while managing debt and attracting outside capital — to sustain a transformation agenda during one of the most volatile periods the Middle East has faced in decades.
The reported discussions with banks suggest that, even as war reshapes the kingdom’s economic calculations, Saudi Arabia is determined to keep financing its ambitions.
