Arabia’s oil industry managed to ride out concerns in the early days of the Iran war and keep exports flowing. Now, with the Houthis staging deadly attacks on the kingdom and signs of disruption stacking up, the worry has shifted to the rest of the economy.

Weeks of sporadic strikes by the Iran-backed Yemeni militants have claimed dozens of lives, curbed air travel in Riyadh, delayed showpiece events and effectively shut the city’s financial district. Saudi stocks have slumped so much that they’re now among the month’s worst performers in global emerging markets.

Economists say it’s too soon to quantify the impact. But most agree that even bumper energy-export revenue due to higher global prices will do little to limit the broader war’s toll on the non-oil sector — the focus of Crown Prince Mohammed bin Salman’s plan to transform the roughly $1.4 trillion economy into a center for everything from tourism to foreign direct investment.

“Now that the Houthis have shown they can disturb economic stability, the direct impact on the non-oil economy, including tourism, transport and FDI is of more concern,” said Mohamed Abu Basha, head of macroeconomic analysis at investment bank EFG Hermes.

Saudi Arabia is grappling with the fallout from the civil war in Yemen at what’s already a trying time. The kingdom has increased its 2026 budget deficit forecast, is bingeing on debt and pulling back from some mega projects. To press ahead with the so-called Vision 2030 agenda amid the fiscal strain, stability and FDI will become ever more vital.

Both may prove challenging. US President Donald Trump has threatened a new campaign against Iran after the US midterm elections on Nov. 3 and Iran is preparing to retaliate against Washington’s Middle Eastern allies.

Such an escalation would put Saudi Arabia in a position of fighting dual fronts in the wider Middle East conflict; one with the Houthi rebels and one more directly with Iran. That only exacerbates risks to the non-oil economy, which now makes up more than 50% of gross domestic product.

“The attacks on Saudi take away one of the investment attractions of the past, namely stability in an unstable region,” said Tim Callen, a former International Monetary Fund mission chief for Saudi Arabia. “With the risk of escalation in the US-Israel attacks on Iran, things don’t look likely to get better in the short-term.”Saudi Arabia’s defense minister Khalid bin Salman, who’s the brother of the crown prince known as MBS, was due to hold regional security talks in the Iranian capital, Tehran, on Monday. Those talks included officials from Turkey and Pakistan as the kingdom and its allies try to defuse tensions and avert a wider regional conflict.

For now, economists are still bracing for an escalation they expect to have the largest impact on the non-oil sector. Callen and others see the oil economy continuing to show resilience as Brent trades around $115 a barrel and Saudi crude exports recover to near pre-war levels.

Should exports continue and Brent stay near that level through November, Saudi Arabia stands to make an additional $11 billion in oil revenue combined this month and next, said Abu Basha at EFG Hermes. That could be enough to narrow the expected budget deficit of almost 5% of GDP this year, he added.

Saudi Arabia’s significant financial buffers and its domestically-driven economy, in which the population is largely Saudi, may also help minimize the consequences of war.

Riyadh has raised its spending forecast for this year as it’s seen directing more to defense, transport and infrastructure. Additional cuts to diversification projects are now expected as the kingdom looks to minimize other expenditure, according to a dozen economists and investors who spoke to Bloomberg.

While that stands to potentially ease some of the fiscal strain, Goldman Sachs Group Inc.’s regional economist, Farouk Soussa, says there are concerns over a tightening of domestic liquidity. He pointed to a slowdown in bank deposits and recent increases in the Saudi Interbank Offered Rate, or Saibor, a key gauge of borrowing costs.

For investors looking at credit, the oil picture should offer some comfort, said Razan Nasser of T. Rowe Price. “However, without a sustained reduction in security risks, risk premia could rise as concerns about the fiscal costs and broader economic impact build over time.”Saudi Arabia remains a strong sovereign credit with a relatively low debt-to-GDP ratio of about 30% and enjoys ready access to capital markets.

For those tracking equity markets, the worry is around weaker non-oil growth on corporate earnings, according to Gama Asset Management’s Rajeev De Mello.

Already, Saudi Arabia’s equity market main benchmark is trading near its lowest levels since 2021 after suffering sustained losses over the past two months.

“If there is a credible security plan in place post-conflict which convinces people that future attacks are very unlikely, then things will go back to normal,” said Callen, now a visiting fellow at the Arab Gulf States Institute.

“If this credibility doesn’t exist, then I think there will be a longer-term negative impact on the kingdom’s diversification plans.”