Saudi Arabia faces liquidity crunch even as oil exports rebound to pre-war levels

Saudi Arabia is facing a liquidity squeeze as bank deposit growth slows and economic pressures mount amid the US-Israeli war on Iran. Bank of America says tight liquidity in the UAE is also affecting Saudi banks, highlighting how financial links across the Gulf can transmit pressure between economies.

Saudi banks have many interbank transactions with Emirati counterparts, which contribute to their deposits. Government entities are withdrawing funds while demand for loans remains high, increasing the cost of money in Saudi Arabia. The pressure matters because the kingdom’s currency is pegged to the US dollar, as are those of several other Gulf states.