Saudi Arabia faces liquidity crunch even as oil exports rebound to pre-war levels

Saudi banks are grappling with 'contagion' from tighter liquidity in the UAE, as war slows deposits, Bank of America warns Saudi Arabia's Crown Prince Mohammed bin Salman is seen before his meeting with Syria's President Ahmed al-Sharaa in Riyadh, on 4 November 2026 (Saudi Press Agency/AFP) Published date: 11 November 2026 21:39 GMT | Last update: 4 sec ago Saudi Arabia is feeling the pinch of a liquidity crisis as bank deposits slow and the economy comes under pressure from the US-Israeli war on Iran, a new report from Bank of America says. In a note to clients, Bank of America said Saudi Arabia is grappling with “contagion” caused by liquidity tightness in the UAE and a rapid slowdown in the kingdom’s own economy, according to an article published on Bloomberg on Tuesday. The report said Saudi banks are feeling the pain in the UAE, which is also grappling with fallout from the Iran war and tighter liquidity. Saudi banks are closely linked to their Emirati neighbours, with a high number of interbank transactions contributing to deposits at Saudi banks. At the same time, the Saudi economy is under strain and government entities are making withdrawals from Saudi banks. But loan demand is high, which is effectively raising the cost of Saudi money. The liquidity strain is notable for Saudi Arabia because its currency is directly pegged to the US dollar, along with Gulf states including the UAE, Qatar, Oman, and Bahrain. New MEE newsletter: Jerusalem Dispatch Sign up to get the latest insights and analysis on Israel-Palestine, alongside Turkey Unpacked and other MEE newsletters Gulf central banks can’t inject additional liquidity into their markets like the US, Europe and Russia because their currencies are set against the dollar and their interest rates track those set by the US Federal Reserve. Oil exports rebound Saudi Arabia has avoided the worst fallout from the US-Israeli war on Iran, but its economy is still tied to smaller Gulf states. For example, the UAE is Saudi Arabia's single largest foreign direct investor. Houthis launched cross border raids on Saudi military posts, sources say Read More » More recently, the kingdom’s economy has been rocked by the collapse of a ceasefire in Yemen. Saudi Arabia has come under Houthi missile and drone attacks targeting energy infrastructure, airports and high-profile commercial buildings. The Aramco Tower, a skyscraper in Riyadh, was hit by a Houthi air attack earlier this week. The liquidity strain comes even as Saudi Arabia’s oil exports rebound to pre-war levels. Saudi Arabia told the Organization of Petroleum Exporting Countries that it pumped 10.6 million barrels per day (bpd) of oil in October, up from 8.372 million bpd in September. The number marked Saudi Arabia's highest output since February, before the US and Israel attacked Iran. The East-West Pipeline terminating at the Red Sea port of Yanbu allowed Saudi Arabia to bypass Iran's attacks in the Strait of Hormuz, but the pipeline has been targeted by the Houthis and militias in Iraq, according to Riyadh. The latest strike against the pipeline occurred on Monday. Middle East Eye delivers independent and unrivalled coverage and analysis of the Middle East, North Africa and beyond. To learn more about republishing this content and the associated fees, please fill out this form. More about MEE can be found here.