Saudi Arabia explores $8 billion loan as Iran war strains finances

Saudi Arabia's National Debt Management Center is in early-stage discussions with banks to raise at least $8 billion through a fresh loan, as the economic fallout from the Iran war strains the kingdom's finances and disrupts its oil sector, according to Bloomberg. State-backed oil giant Saudi Aramco is separately engaging lenders about possible financing, though both sets of talks may not result in deals.indiatoday

The borrowing push comes after Saudi Arabia posted a budget deficit of 34.3 billion riyals, or roughly $9.1 billion, in the second quarter of 2026. While that marked an improvement from the 125.7 billion-riyal shortfall recorded in the first quarter, the kingdom's fiscal position remains under pressure from war-related disruptions to shipping through the Strait of Hormuz, attacks on energy infrastructure, and rising import costs.bloomberg+1

Mounting Debt, Mounting Ambitions

The potential new loan would add to a growing stack of external borrowing. Saudi Arabia has already raised around $6 billion through domestic and international bonds this year, while Aramco tapped global debt markets for $4 billion in January. The kingdom's Public Investment Fund raised $7 billion in May in one of the first public-market deals since the Iran war began.reuters+1

Late last year, the NDMC secured a $13 billion, seven-year syndicated loan as part of efforts to diversify funding sources beyond conventional bond markets. The NDMC said in May that it had completed its annual borrowing plan, covering roughly 90% of the kingdom's financing needs, with remaining requirements to be met through private financing and local markets.indiatoday

Oil Squeeze and Diversification Spending Collide

Saudi Arabia's economy suffered its steepest contraction since the pandemic in the second quarter, with the oil sector shrinking by nearly 25%, Bloomberg reported. Iran's targeting of Saudi energy infrastructure and Houthi threats in the Red Sea have complicated Riyadh's ability to export crude, though Brent crude averaging around $87 a barrel this year has provided partial relief.whalesbook+2

Even as it manages wartime fiscal pressure, Saudi Arabia has not pulled back from Crown Prince Mohammed bin Salman's Vision 2030 diversification agenda. The kingdom recently committed to a roughly $7 billion theme park complex near Paris, and Aramco is pursuing a privatization plan that could eventually raise as much as $35 billion. Under its latest five-year strategy, the roughly $900 billion PIF is shifting toward asset transfers, listings, and external capital to fund the kingdom's long-term economic transformation.indiatoday