Saudi foreign investment falls 20% in war's first full quarter

Summary

• Net FDI into Saudi Arabia fell nearly 20% year-on-year to its lowest level since 2024.
• Riyadh targets $100 billion in annual foreign investment by 2030 under its transformation program.
• Semafor says the Iran war is dragging on inflows, making that target harder to reach.

The latest

Net foreign direct investment into Saudi Arabia dropped close to 20% from a year earlier in the first full quarter of the Iran war, falling to its weakest level since 2024, Semafor Gulf reported. The kingdom recorded roughly $11 billion in net FDI across the first half of 2026 — far off the pace needed for its $100 billion-a-year ambition.

Details

• The numbers: Net inflows declined by nearly 20% compared with the same quarter of 2025, the lowest reading since 2024, according to Semafor Gulf. For the first six months of 2026, Saudi Arabia logged about $11 billion in net foreign direct investment.
• The target: The kingdom is aiming to draw $100 billion a year in foreign investment by 2030, a pillar of Crown Prince Mohammed bin Salman's economic transformation program. At the first-half run rate, actual inflows are running at a small fraction of that annual goal.
• Why capital matters: Semafor Gulf said attracting outside money is central to Saudi development plans, particularly as the government works to expand private-sector business activity. The push comes while Riyadh adjusts its spending in response to mounting budget deficits.
• The war factor: This year's figures indicate the Iran war has acted as a drag on foreign direct investment, Semafor Gulf reported, making the long-term $100 billion goal harder to achieve. The newsletter did not specify which sectors absorbed the sharpest declines.
• The equity picture: Saudi stocks have rebounded since the war began and outperformed regional peers, which Semafor Gulf attributed to the kingdom's continued ability to export crude. The recovery has not erased the initial hit to the market.
• Still underwater: The Tadawul index remains down 3% since the war started on Feb. 28, according to Semafor Gulf. Over the same stretch, the MSCI Emerging Markets Index gained 6%, leaving Saudi equities roughly 9 percentage points behind the broader emerging-market benchmark.
• The divergence: The two data sets point in different directions: tradable equities have partly recovered on oil export resilience, while the longer-horizon capital that FDI represents has retreated to a two-year low. Semafor Gulf did not give a quarterly dollar figure for the decline.

Background

Foreign direct investment is a core metric for Saudi Arabia's Vision 2030 program, which seeks to reduce reliance on oil revenue by drawing international capital into non-oil sectors. The $100 billion annual target has been among the program's most closely tracked benchmarks.

Between the lines

The gap between the stock market's partial recovery and the FDI drop reflects two different types of money. Equity investors can enter and exit quickly and have been reassured by uninterrupted crude exports; direct investors commit capital for years and price in war risk differently. That distinction is why a 3% index decline sits alongside inflows at their lowest since 2024.

What's next

Watch third-quarter FDI data for whether the decline deepened or stabilized, Tadawul's performance against the MSCI Emerging Markets Index, and any revision to Riyadh's spending plans as deficits widen.

Source: Semafor Gulf