The recent slump in oil markets, driven by fears of a US-China trade war and OPEC+'s surprise output increase, poses challenges for oil-dependent economies, particularly in the Middle East. Saudi Arabia, the world's top oil exporter, faces significant vulnerability due to its heavy reliance on oil revenues, which constitute 60% of its government income. With oil prices projected to decline further, Saudi Arabia's ambitious Vision 2030 projects, such as the development of the futuristic city NEOM and other mega-projects, could face delays if budget cuts become necessary. Despite tensions within OPEC and countries like Kazakhstan prioritizing national interests over group agreements, Saudi Arabia's low production costs may allow it to withstand lower oil prices better than other nations. Although the kingdom can manage the situation by reducing spending and borrowing, the lower oil prices could still slow down its economic diversification efforts away from oil dependency.

Oil prices have recently fallen due to fears of a trade war between the US and China and OPEC+'s unexpected decision to increase output, impacting oil-dependent Middle Eastern economies significantly.

Saudi Arabia, which derives 60% of its government revenue from oil, is particularly vulnerable to these price declines, as it requires prices above $100 per barrel to balance its budget.

Goldman Sachs and JP Morgan forecast continued declines in oil prices through 2025 and 2026, with Brent crude expected to average around $63 and $66 per barrel, respectively.

Saudi Arabia's Vision 2030 involves giga-projects like NEOM and luxury tourism destinations, which may face delays if oil revenues decline further and necessitate capital expenditure cuts.

Tensions within OPEC, with countries like Kazakhstan exceeding production quotas, complicate efforts to stabilize oil prices, although Saudi Arabia's low production costs provide some resilience.

Despite the challenges, Saudi Arabia remains in a strong fiscal position with low public debt, allowing for potential budget adjustments through spending cuts and borrowing.

The kingdom's plans to host major international events, such as the 2029 Asian Winter Games and the 2034 FIFA World Cup, may take precedence in infrastructure spending priorities.