Saudi non-oil PMI shrinks in March amid Middle East conflict

Saudi Arabia’s non-oil private sector contracted in March as the seasonally-adjusted Riyad Bank Saudi Arabia PMI dropped to 48.8, moving below the 50 threshold that separates expansion from contraction. The reading points to a near-term slowdown in business activity across services and non-oil manufacturing.

The survey details indicate a marked fall in new orders and output: new orders reportedly fell to 45.2 from markedly higher levels in February, while export demand weakened substantially. For context, Riyad Bank’s February release showed a PMI of 56.1, underscoring the abruptness of the March reversal. The PMI series is compiled under S&P Global’s methodology and reflects short-term changes in order books, employment, supplier delivery times and inventories.

Market participants linked the downturn to heightened geopolitical tensions in the region and disruptions through the Strait of Hormuz, which pushed logistics costs higher and constrained cross-border flows. Firms surveyed reported slower deliveries, increased lead times and, in some cases, temporary suspension of export activity—factors that typically depress output and push firms to delay hiring or investment decisions. Commodity price volatility amplified operational challenges for import-reliant sectors.

In a broader economic context, S&P Global commentary on the period highlights that the Middle East conflict has had immediate effects on energy markets and global supply chains, elevating inflationary pressures and creating policy uncertainty for regional economies. While fiscal buffers and ongoing infrastructure programmes support medium-term resilience, short-term indicators like the PMI can swing sharply in response to external shocks.

Analysts expect the March contraction to be largely temporary if shipping lanes reopen and supply chains adapt; however, they caution that prolonged export disruption or further escalation could sustain weaker external demand, amplify input cost pressures and weigh on growth prospects. Investors and policymakers will watch subsequent PMIs and trade flow data for signs of normalization or persistent weakness.