Kingdom announces sharp rise in budget shortfall amid the effective closure of the Strait of Hormuz.

Saudi Arabia has posted a sharp rise in its budget deficit amid declining oil revenues due to the effective closure of the Strait of Hormuz.

The kingdom’s budget shortfall widened to 125.7 billion riyals ($33.5bn) in the first three months of the year as rising government spending coincided with a fall in crude sales, according to the latest budget figures released by the Saudi Ministry of Finance on Tuesday.

Total government spending rose 20 percent to 386.7 billion riyals year-on-year, while oil revenues fell 3 percent to 144.7 billion riyals, according to the figures.

The budget gap was more than double the shortfall posted during the same period last year, and up nearly one-third from the final quarter of 2025.

The deficit marks a significant departure from the kingdom’s financial outlook for the year.

Saudi officials had in December projected a deficit of 65 billion riyals ($17bn) for the whole of 2026.

By sector, economic resources was responsible for the biggest rise in government spending, increasing 52 percent year-on-year.

Spending on general items rose 46 percent, while the military, infrastructure and transport each saw a 26 percent gain in expenditures.

Non-oil revenues rose by 2 percent, partly offsetting the drop in commodities sales.

As the world’s top oil exporter, Saudi Arabia lost a key economic lifeline with the collapse of shipping in the strait, though the kingdom has been able to reroute much of its exports through the Red Sea port of Yanbu via the East-West Pipeline.

Riyadh’s crude and petroleum products’ sales account for more than half of government revenues, generating 606.5 billion riyals for state coffers in 2025.

Maritime traffic in the Strait of Hormuz, which usually carries about one-fifth of global fuel supplies, has been at a standstill for more than two months amid Iranian threats against shipping in the region.

On Tuesday, United States President Donald Trump suspended his military operation aimed at reopening the strait, dubbed “Project Freedom”, less than 48 hours after it began, citing “great progress” being made towards a peace deal with Iran.