Saudi Arabia launches dollar bond sale as Iran war squeezes oil revenues

Saudi Arabia returned to international debt markets on September 1 with a benchmark-sized dual-tranche dollar sukuk. Orders for the offering have already surpassed $9 billion.

The five-year and 10-year tranches were marketed at initial pricing thoughts of roughly 100 and 110 basis points over US Treasuries, respectively.

A borrowing spree driven by war economics

The Iran conflict, which began in late February 2026, has upended Saudi Arabia’s revenue assumptions. Oil export disruptions contributed to a first-quarter budget deficit of 125.7 billion riyals, roughly $33.5 billion.

The kingdom’s National Debt Management Center has been busy all year. In January, Saudi Arabia raised $11.5 billion through a multi-tranche bond sale. By May, the Public Investment Fund added another $7 billion in issuances. There are also ongoing efforts to secure an additional $8 billion in syndicated loans.

Saudi Arabia’s total financing target for 2026 sits at approximately 217 billion riyals, or about $58 billion. That figure covers both new deficits and the rollover of maturing debt. Public debt-to-GDP has climbed to nearly 34%.

Investor demand remains surprisingly resilient

Gulf economies broadly are expected to contract between 5% and 10% in 2026, according to current forecasts. Despite this, demand for Gulf debt has remained robust, with each of Saudi Arabia’s major issuances this year drawing more buyers than bonds available.

Vision 2030 meets wartime fiscal reality

Saudi Arabia’s Vision 2030 was designed to reduce the kingdom’s dependence on oil revenues. The NDMC, established as part of the Vision 2030 framework, has become one of the most active sovereign issuers in emerging markets.

At nearly 34% of GDP and climbing, Saudi Arabia’s debt burden is still manageable by international standards. Over $9 billion in orders for a wartime sukuk suggests that investors believe Saudi Arabia’s fiscal trajectory, while strained, is far from broken.