Saudi Arabia has stopped issuing new contracts for western consultants and delayed some payments, despite the kingdom’s oil export revenue soaring to a three-year high on the back of the US-Israeli war on Iran.
The halt in new consultancy contracts came after the US-Israeli war on Iran erupted, The Financial Times reported on Thursday.
One executive told the paper that payments of existing invoices have also been postponed until the end of the second quarter, which is the end of June. Saudi Arabia denied that it halted payments.
While some executives cited the war on Iran for the decision, Saudi Arabia’s hesitancy to engage western consultants may go beyond a war shock.
Saudi Arabia is, in fact, benefiting from rising oil prices and its ability to continue exporting amid the Iran war.
Saudi Arabia’s revenue from oil exports jumped to a more than three-year high of $24.7 billion in March of this year, according to the General Authority for Statistics.
Revenue was the highest since October 2022, largely due to rising crude and refined product prices resulting from the war.
With the exception of the UAE, which has a pipeline to bypass the Strait of Hormuz via Fujairah and Oman, a small oil producer compared to its neighbours, the Gulf has been unable to capitalise on rising oil and gas prices.
The Strait of Hormuz is effectively closed by competing US and Iranian blockades.
Saudi Arabia's East-West Pipeline, which connects its Gulf coast to the Red Sea port of Yanbu, has allowed it to effectively bypass the Strait of Hormuz.
Saudi Arabia is exporting at around 70 percent of its pre-war levels. Meanwhile, Brent, the international benchmark, is trading at 50 percent above its pre-war levels.
Despite this, it still has a fiscal deficit, meaning the government is spending more money than it is generating in revenue.
The country's deficit was $33.5bn in the first quarter, with total government spending rising 20 percent year-on-year.
Saudi Arabia says it has had to increase spending to support the wider economy. Military spending also increased 26 percent in the first quarter, as Saudi Arabia responded to Iranian missile and drone attacks.
In recent months, Saudi Arabia has drastically scaled back megaprojects that rely heavily on outside consultants and pivoted towards logistics, mining, tech, and AI-related projects. Its flagship megaproject, Neom, was entirely omitted from its 2026 pre-budget statement.
Saudi Arabia has been a magnet for western consultants since the 1950s.
But firms like McKinsey and Boston Consulting Group saw new opportunities after Crown Prince Mohammed bin Salman rolled out his Vision 2030 programme in 2016.
Western consultants were largely responsible for planning and developing Neom, which was supposed to include a ski resort with artificial snow and The Line, a 170km straight-line city.
Even before the US-Israeli war on Iran, these high-flying projects were being cancelled or massively scaled down as the kingdom realised the massive cost behind them and limited international investor interest. For example, Saudi Arabia was weighing cutting staff at Neom in July 2025.
The kingdom’s finance minister, Mohammed al-Jadaan, said in December that Saudi Arabia had “no ego” in preventing it from reassessing projects.
