GCC Weekly

Research evidence excerpt

GCC Weekly

Hormuz during the quarter, and the

The trade trend was already evident in high-frequency data,

resulting disruption to oil sector activity. The weakness was

but the newly released BOP statistics provide greater insight

largely concentrated in the oil sector, with oil activities con-

into the financing side of the adjustment.

tracting 24.7%oya, subtracting 5.4pp from headline growth,

while non-oil activities slowed to 0.6%oya and contracted on

The two countries for which detailed 1Q26 BOP data are cur-

a sequential basis.

rently available, Bahrain and Saudi Arabia, display several

common features. Both recorded sizeable portfolio invest-

ment divestment, equivalent to around 9.0% of GDP in Bah- Figure 2: Saudi Arabia GDP

rain and 1.6% of GDP in Saudi Arabia, alongside substantial %oya 15

portfolio inflows linked to debt issuance that took place

before the conflict escalated. These financial flows, together 10

with some degree of foreign asset liquidation, helped support 5

central bank reserves at a time of heightened pressure on

exchange rate pegs and external financing conditions. As a

result, both countries were able to record reserve accumula- -5

tion in 1Q26, amounting to 2.8% of GDP in Bahrain and -10

2.7% of GDP in Saudi Arabia. 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Source: GASTAT, J.P. Morgan

Important differences remain between the two economies.

Saudi Arabia, similarly to Oman, continued to benefit from The sharp contraction in oil activity was largely in line with

relatively strong oil export revenues, supported by the avail- our expectations. The weakness likely reflects not only lower

ability of alternative Red Sea export routes that allowed crude crude extraction, which contracted to 6.8mbpd in 2Q26 from