Saudi crown prince faces perfect storm as war, oil shock and economic woes collide

MBS warned against US-Iran conflict now grappling with spiralling security costs, scaled-back mega-projects and doubts over Vision 2030

By LineZotpaper

Published23 October 2026

Read Time3 min

Just four years after being feted by world leaders and riding a wave of oil wealth, Saudi Crown Prince Mohammed bin Salman is confronting a crippling convergence of crises: a regional war he warned against, a deteriorating economy, and the waning appeal of his signature transformation project, Vision 2030, according to a Semafor analysis.

Even before the Iran war, Saudi Arabia’s budget deficit was widening, signature investment projects were being scaled back, and the sugar rush from sweeping economic and social reforms was wearing off, Semafor reports. US President Donald Trump’s war with Iran, which MBS warned against, has made matters worse.

The crown prince now faces crises on multiple fronts: a global energy shock, a regional security emergency, and a deteriorating domestic economic outlook. Together, they form a perfect storm that exposes the limits of his ability to shape events in the region.

Looking through the prism of oil, attacks on shipping through the Strait of Hormuz and Bab el-Mandeb have boosted prices enough to offset lower export volumes. But the short-term gains mask a longer-term risk. Despite efforts to keep crude moving, the Gulf's reputation as a reliable energy provider has been damaged. The longer the disruption lasts, the more key energy importers will prepare for life without Saudi oil, accelerating investment in renewables and alternative sources.

MBS’s vision of Saudi Arabia as the center of a prosperous Middle East, a place for international firms to invest, holidaymakers to visit, and the wealthy to buy homes, is becoming a tougher sell. The Houthis in Yemen have demonstrated an alarming ability to strike deep inside Saudi Arabia, unnerving residents and potential visitors. If the war with Iran intensifies again, foreign executives may be reluctant to even visit, let alone invest.

Efforts to diversify the domestic economy away from oil are losing steam. After allocating about 8% of GDP to NEOM, the government has admitted a costly defeat. Plans for the 2034 men’s soccer World Cup are being scaled back, as are other giant projects. Yet the security crisis and higher fuel costs are pushing expenditure up faster than oil revenues. Government debt is low by global standards but climbing.

MBS's efforts to get close to Trump by promising investments and putting money into Trump family business interests have not translated into leverage in Washington. China, which brokered a rapprochement between Saudi Arabia and Iran in 2023, is either unwilling or unable to help. And despite huge military spending, Saudi forces have struggled to deter their enemies.

Analysis

Why This Matters

The stability of global oil markets and energy security depends in part on the Gulf's reputation as a reliable supplier, which is now damaged
The Middle East regional security picture could shift if Saudi Arabia's economic transformation stalls, reducing its ability to project stability or deter aggression
International investors and firms with exposure to Saudi mega-projects face rising uncertainty and potential losses

Background

Saudi Crown Prince Mohammed bin Salman, known as MBS, rose to power in 2017 on a platform of sweeping economic and social reforms aimed at diversifying the kingdom away from oil by 2030. The early years saw liberalisation of entertainment and women's rights, massive infrastructure projects including the $500 billion NEOM development, and a high-profile international charm offensive. However, the kingdom has been embroiled in a costly war in Yemen since 2015 and has faced growing budgetary pressures as oil revenues fluctuate. The Iran war, which MBS reportedly advised against, has intensified regional instability and placed new strain on Saudi finances.

Key Perspectives

[Saudi Crown Prince Mohammed bin Salman]: Seeks to position the kingdom as a regional hub for investment, tourism and culture, but is constrained by war, falling oil income and rising security costs. He has attempted to secure US backing through investment pledges but has gained little leverage. [International investors and firms]: Face heightened risk in committing to Saudi projects as security concerns grow and the government scales back flagship investments. Some critical infrastructure deals, like the recent Kuwait oil pipelines arrangement, still attract capital. [Critics]: Argue that Saudi Arabia's military spending has not translated into effective deterrence, as evidenced by Houthi strikes. The scaling back of projects like NEOM and World Cup plans suggests the economic model may be unsustainable without fundamental reform.

What to Watch

Whether oil prices remain elevated enough to offset Saudi budget deficits or whether a post-war glut forces the kingdom to fight for market share
The trajectory of the US-Iran conflict; a further escalation could deter foreign investment and worsen the security environment
Saudi government announcements on project spending, debt levels and diversification milestones for Vision 2030

Sources

Saudi crown prince grapples with the limits of his power · Semafor

Checked

11 claims in this story checked against 1 source: 8 supported.

Show each claim

SupportedMBS faces a “perfect storm” as war, an oil shock and economic problems converge.Semafor: “MBS now faces crises on multiple fronts: a global energy shock, a regional security emergency, and a deteriorating domestic economic outlook. Together, they form a perfect storm”
SupportedMBS warned against the war with Iran.Semafor: “US President Donald Trump’s war with Iran, which MBS warned against, has made matters worse.”
Partly supportedThe summary characterises Saudi Arabia’s security costs as “spiralling.”Semafor: “the security crisis and higher fuel costs are pushing expenditure up faster than oil revenues. Government debt is still low by global standards, but is climbing.”
SupportedSaudi Arabia’s signature projects are being scaled back, and the appeal of Vision 2030 is waning.Semafor: “signature investment projects were being scaled back, and the sugar rush from the sweeping economic and social reforms was wearing off.”
Partly supportedMBS was feted by world leaders four years ago.Semafor: “Just four years ago, Saudi Crown Prince Mohammed bin Salman was at the peak of his powers. He was feted by the Chinese president”
Partly supportedAbout 8% of GDP was allocated to NEOM, after which the government admitted a costly defeat.Semafor: “After allocating about 8% of GDP to NEOM, once contract cancellations are included, the government has admitted a costly defeat.”
SupportedAttacks on shipping through the Strait of Hormuz and Bab el-Mandeb raised prices enough to offset lower export volumes.Semafor: “the attacks on shipping through the Strait of Hormuz and Bab el-Mandeb boosted prices enough to offset lower export volumes.”
SupportedThe disruption risks damaging the Gulf’s reputation as a reliable energy provider and accelerating investment in alternatives.Semafor: “The longer the disruption lasts, the more key energy importers will prepare for life without Saudi oil. Consumers will seek alternative sources of hydrocarbons and accelerate investments in renewables.”
SupportedThe Houthis have demonstrated an ability to strike deep inside Saudi Arabia, unnerving residents and potential visitors.Semafor: “The Houthis in Yemen [...] have demonstrated an alarming ability to strike deep inside Saudi Arabia [...] Residents and potential visitors are unnerved.”
SupportedPlans for the 2034 men’s soccer World Cup and other giant projects are being scaled back.Semafor: “Plans for the 2034 men’s soccer World Cup are being scaled back, as are other giant projects.”
SupportedEfforts to get close to Trump through US investment promises and money in Trump family businesses have not translated into leverage in Washington.Semafor: “Efforts to get close to Trump by promising investments into the US and putting money into Trump family business interests haven’t translated to leverage in Washington.”