RIYADH: Saudi Arabia has so far contained the inflationary fallout from the Middle East war better than many regional peers, with consumer price growth staying below 2 percent even as global inflation pressures returned through higher energy, food and transport costs.
The Kingdom’s Consumer Price Index rose 1.7 percent year on year in April, according to Kamco Invest’s May 2026 Gulf Cooperation Council inflation update, keeping Saudi inflation “slightly below the 2 percent mark” during the first several months of the year.
The relative stability stands out as the same report said the war has reversed part of the global disinflation trend seen over the past two years, with the International Monetary Fund revising global headline inflation up to 4.4 percent in 2026 before an expected decline to 3.7 percent in 2027.
The inflation risks highlighted by Kamco Invest are also reflected in the World Bank’s latest Commodity Markets Outlook, which said the Middle East war is set to trigger the sharpest energy price surge in four years.
The World Bank expects energy prices to rise 24 percent in 2026 and overall commodity prices to increase 16 percent, driven by higher energy, fertilizer and metals prices. It said the shock is moving through the global economy through energy, food and broader inflation channels, adding pressure on interest rates and debt costs.
The Saudi reading was driven mainly by housing-related costs, reflecting the continued weight of rents in the Kingdom’s inflation basket. Housing, water, electricity, gas and other fuel prices increased 3.8 percent year-on-year in April, supported by a 4.8 percent rise in actual rentals for housing.
Transport prices rose 1 percent, driven by a 5.2 percent increase in passenger transport services, while restaurant and accommodation services increased 1 percent, supported by a 2 percent rise in accommodation prices.
Food inflation in Saudi Arabia remained comparatively limited, despite wider regional pressure on grocery prices.
Food and beverage prices increased 0.6 percent year-on-year in April, led by a 1.8 percent rise in fresh, chilled or frozen meat.
On a monthly basis, Saudi inflation rose 0.2 percent from March, while food and beverage prices increased 0.8 percent, driven by a 0.9 percent rise in the broader food group.
The IMF’s regional outlook supports the view that Saudi Arabia has so far faced a more limited inflation shock than some of its GCC peers.
The fund said upward inflation revisions among GCC economies and Iraq ranged from about 0.5 percentage points in Saudi Arabia to about 1.5 percentage points in Bahrain, mainly because of higher trading costs.
The IMF also said Saudi Arabia is less sensitive than Kuwait to oil price and export volume swings, with a 10 percent increase in oil prices or a 10 percent decline in export volumes having a smaller current-account effect in the Kingdom than in Kuwait.
The Saudi figures suggest that the region’s largest economy has not been immune to external shocks, but has avoided a broad inflation surge. Kamco Invest said GCC inflationary effects are “present but generally moderate” under a reference scenario that assumes disruptions fade by mid-2026.
The report warned, however, that the bloc remains exposed to food imports, which account for more than 80 percent of consumption in four GCC countries, as well as reliance on desalinated water. Prolonged disruptions could affect inventories and push up food prices.
Across the GCC, inflation trends are becoming more uneven as the shock moves through energy, shipping, food and housing channels.
Kuwait’s CPI increased 2.6 percent year on year in April and 0.65 percent month on month, led by a 6.3 percent rise in food and beverages. Services and miscellaneous prices rose 6.9 percent, while transport prices increased 4.5 percent.
In the UAE, inflation is expected to remain close to the 2 percent mark, but fuel prices have already moved sharply higher. Kamco Invest said diesel prices in April rose more than 70 percent month on month to 0.69 Emirati dirhams ($0.19) per liter, while petrol prices increased more than 30 percent.
The report said this was the second consecutive month of fuel price increases, in line with the global rise in prices since the start of the Middle East war at the end of February 2026.
Dubai’s CPI increased 3 percent year on year in December, slightly above the 2.9 percent monthly average recorded in December 2024. Housing, water, electricity and gas remained the main driver, with the category recording a 6.4 percent annual increase in 2025.
For the UAE as a whole, inflation rose 1.3 percent in 2025, down from 1.7 percent in 2024, as increases in housing, insurance and recreation were partly offset by declines in transport and clothing.
Qatar recorded one of the sharper food-price moves in the region. Its inflation rate increased 2.6 percent year on year in April, although CPI declined 0.7 percent month on month.
The largest yearly increase came from miscellaneous goods and services, up 13.8 percent, followed by food and beverages, which rose 10.4 percent. Clothing and footwear increased 4.71 percent, while education rose 2.1 percent and housing, water, electricity, gas and other fuels increased 1.62 percent.
Bahrain remained among the lower-inflation GCC economies, with CPI rising 1.1 percent year on year in March.
Food and non-alcoholic beverages increased 2.8 percent year on year, while the same category rose 4.8 percent month on month.
However, eight of Bahrain’s 12 CPI sub-indices declined on a monthly basis, led by a 4.9 percent fall in recreation and culture.
Oman recorded the highest inflation rate among GCC countries covered in the April data, with CPI rising 3.2 percent year on year.
The increase was led by miscellaneous personal goods and services, up 9.2 percent, and food and non-alcoholic beverages, up 6.2 percent. Food inflation was broad-based, with vegetables rising 25 percent, fruits 11.6 percent, and fish and seafood 6.1 percent.
The broader global backdrop remains the main risk for GCC policymakers. Kamco Invest said war-related spikes in crude oil, natural gas, fertilizers and metals have pushed global inflation forecasts higher.
In a more adverse scenario, the report said oil prices could reach $110 per barrel, lifting global inflation to 5.4 percent in 2026. Under a more severe disruption scenario, global headline inflation could rise to just above 6 percent by 2027.
However, the OECD’s latest interim outlook suggests the inflation shock may be contained if energy disruptions ease.
The organization said its baseline assumes current energy-market disruption moderates over time, with oil, gas and fertilizer prices declining gradually from mid-2026 onward. Still, it warned that persistent disruption to exports from the Middle East could raise energy prices further, add to inflation and reduce growth.
For regional central banks, the inflation shock has complicated expectations for monetary easing. The report said the global inflation uptick has halted expected widespread rate cuts for 2026.
The US Federal Reserve kept its benchmark funds rate steady at 3.5 percent to 3.75 percent in April, while GCC central banks continued to match Fed policy by keeping rates unchanged during the first months of the year.
