Moody's Ratings on Thursday confirmed Saudi Arabia's Aa3 long-term issuer ratings in both local and foreign currency, including the country’s senior unsecured obligations, and left the outlook at stable. The agency also reaffirmed the country's local and foreign currency senior unsecured medium-term note program ratings at (P)Aa3. This action comes against the backdrop of an effective closure of the Strait of Hormuz since early March.
The ratings affirmation reflects a combination of structural and cyclical strengths that Moody's attributes to the kingdom. The agency highlighted Saudi Arabia's sizeable and wealthy economy, underpinned by a vast hydrocarbon endowment and low production costs that support a highly competitive position in global energy markets. Moody's also cited improving institutional and policy effectiveness and progress under Vision 2030, which has supported stronger non-hydrocarbon growth through sustained public investment, structural reforms and gradual improvements in fiscal and economic transparency.
Moody's expects government revenue to outperform pre-conflict expectations because of oil prices averaging $90–110 per barrel in 2026. The agency said this revenue outlook gives authorities additional flexibility to raise spending on economic support measures, subsidies and defense without undermining the sovereign's credit profile.
On the growth outlook, Moody's projects real gross domestic product to contract by around 1.7% in 2026. The forecasted decline is explained by an anticipated 10% fall in hydrocarbon output and a slowdown in non-oil activity driven by weaker confidence and higher costs. In Moody's view, 2027 should see a sharp recovery with growth near 8% as trade flows through the Strait of Hormuz normalize, oil production increases from its lower level and oil prices decline from currently elevated levels.
Moody's expects government debt to remain moderate at about 32% of GDP in 2026, a level it describes as broadly in line with similarly rated peers. The stable outlook reflects the agency's assessment that the kingdom's credit profile can withstand significant disruptions to trade flows through the strait for the remainder of 2026, provided there is no further major damage to production capacity.
Operationally, the East-West pipeline has been central to Saudi Arabia's ability to continue crude exports since early March. Moody's notes the pipeline can transport 7 million barrels per day, while Red Sea export terminals have the capacity to load up to 5 million barrels per day. These routes have been important to sustaining exports in the face of disruptions to the Strait of Hormuz.
The affirmation extends beyond sovereign ratings. Moody's also affirmed the Aa3-backed senior unsecured foreign-currency ratings and the (P)Aa3-backed senior unsecured foreign-currency medium-term note program ratings of KSA Sukuk Limited and KSA Ijarah Sukuk Limited. Both entities are special purpose vehicles incorporated in the Cayman Islands and are wholly owned by the Government of Saudi Arabia. On the national scale, Moody's reaffirmed Saudi Arabia's Aaa.sa senior unsecured debt rating and its senior unsecured MTN program ratings.
Overall, Moody's decision centers on a mix of strong fiscal flexibility driven by higher-than-expected oil revenue prospects, structural reform momentum under Vision 2030 and the operational capacity to route exports around the Strait of Hormuz. At the same time, the agency's forecasts incorporate material near-term downside in output and growth, followed by a recovery tied to the normalization of trade and production.