Saudi Arabia’s war on Yemen is threatening to push its economy into contraction, widen its budget deficit, and undermine efforts to diversify beyond oil, as mounting military pressure takes an increasing toll on the kingdom, The Wall Street Journal reported.
The repercussions extend far beyond the country, given Riyadh’s role as a major source of funding for the global technology sector. The newspaper described parts of the Saudi capital as resembling a “battlefield.”
Saudi Arabia’s stocks of interceptor missiles are running low, the newspaper reported, while rising defense spending and infrastructure costs threaten to drain funds needed to diversify the kingdom’s economy.
According to the report, Saudi Arabia has struggled to provide air defense coverage across its territory and has been forced to redeploy missile batteries to protect palaces and energy facilities.
Foreign investment fell in the first and second quarters of the year and remained below the target set for 2030, according to Saudi officials. Several projects launched by Saudi Crown Prince Mohammed bin Salman have been put on hold, while Riyadh has abandoned plans to host the 2029 Asian Winter Games.
The newspaper also said the war threatens Saudi Arabia’s efforts to make travel and tourism key pillars of its economy.
According to Capital Economics, the non-oil sector contracted in the second quarter compared with the first.
Meanwhile, despite bin Salman’s pledge to invest about $1 trillion in the United States, Washington has not responded to his request for military assistance.
The Wall Street Journal said the confrontation between Saudi Arabia and Yemen’s armed forces poses new challenges to the kingdom’s security and its plans to transform an economy heavily dependent on oil. Bin Salman has been moving between “heavily guarded palaces equipped with bunkers,” protected by a carefully selected security team.
On Iran, bin Salman has urged his advisers to keep diplomatic channels with Tehran open, as “Riyadh is increasingly looking for the possibility of a diplomatic solution to the conflict.”
Aramco CEO warns Strait of Hormuz closure intensifying global oil squeeze —— Saudi Aramco CEO Amin Nasser has warned that pressure on global energy supplies will intensify until the Strait of Hormuz fully reopens, describing the global squeeze on crude oil as "serious" during the WPC Energy Congress in Riyadh. Nasser said rising refined fuel prices were worsening the situation, while commercial offshore inventories, which provide a buffer against supply disruptions, had fallen well below 6 billion barrels, with most of those supplies already committed. He warned that replenishing inventories while meeting global demand could take up to two years.
— The Cradle (@TheCradleMedia) October 12, 2026
Araghchi and Bin Farhan hold the phone call.
Against this backdrop, Iranian Foreign Minister Abbas Araghchi held a phone call yesterday evening with his Saudi counterpart, Faisal bin Farhan, to discuss the latest developments and the evolving situation in the region.
Araghchi expressed concern over escalating tensions, stressing that persistence with a military approach and disregard for political solutions would further complicate the current situation.
He also emphasized that the region’s ongoing crises have no military solutions, adding that Iran is prepared to provide all forms of support to help launch dialogue between Saudi Arabia and Yemen and facilitate a comprehensive political settlement.
Source: Wall Street Journal Edited by Al-manar