Saudi Arabia’s Grand Vision Slams Into Financial Reality—and the Iran War

Appeals for investment are sprinkled on ubiquitous construction fencing, along with English-language catchphrases such as “redefining livability” and “an extraordinary new normal.” Prince Mohammed’s vision extended to a pledge to invest up to $1 trillion in the U.S. during a landmark visit to the White House in November, earning him praise from President Trump. The warm embrace was a signal that the de facto Saudi leader, once shunned in the West, was fully rehabilitated on the world stage.

Yet those extraordinary plans are slamming into reality. Over the past year, the world’s largest oil exporter began pulling back on many of its promised projects and investments, met with budget shortfalls and unrealistic designs. And now the U.S. and Israeli war with Iran has plunged Prince Mohammed’s sweeping vision deeper into jeopardy.

Iran’s closure of the Strait of Hormuz has limited Saudi oil exports to about half their normal capacity. The kingdom has shut down most of its offshore fields and this week stopped operating one of the world’s largest petrochemical plants.

Hundreds of Iranian drones and ballistic missiles launched at Saudi Arabia have hurt its image as a safe place for investors and visitors, even though most were intercepted. Major events have been canceled, including an F1 race, a capital markets forum and a flag football event featuring Tom Brady. Virgin Atlantic discontinued daily service to Riyadh, which it launched only a year ago. On Thursday, major U.S. companies operating in Riyadh told their staff to work from home for the next few days and some large office towers and business parks, including the King Abdullah Financial District, temporarily closed following Iranian threats against U.S. firms.

The war has already cost Saudi Arabia more than $10 billion in lost revenues and expenses, people familiar with the matter say. The Saudi government didn’t respond to requests for comment.

Nearly every mega-project unveiled as part of Vision 2030 is now under review, a process that predates the war, people familiar with the matter say. Officials are also reconsidering the size of U.S. investments pledged last year, the people said.

At Neom, the planned futuristic city that called for two 1,600-foot skyscrapers running 106 miles, officials had already been quietly ratcheting back plans, leaving a gaping 75-mile trench across the desert. Neom recently canceled major construction contracts at a $38 billion luxury mountain project, meant to be the first outdoor ski resort in the Gulf. Coming after years of work, it raises the prospect that enormous partially-built structures, including a $5 billion dam that was 30% finished, will be simply abandoned. Neom didn’t respond to requests for comment.

In Riyadh, construction crews in recent months parked their backhoes at a quarter-mile-wide pit where the world’s largest building—a gargantuan cube that could hold 20 Empire State Buildings—was supposed to be built.

The $1 trillion Saudi sovereign-wealth fund, the Public Investment Fund, yanked back spending and hiring in numerous areas and sold much of its U.S. stock portfolio, even before the war. In December, PIF pleaded with wealthy families, fund managers and local businesses to pump more money into Saudi projects, people familiar with the matter said. Government departments were told to tighten their belts, reduce travel and stay in cheaper hotels abroad.

PIF governor Yasir Al-Rumayyan said at a conference in Miami at the end of March that “The Saudi macroeconomic position remains strong, stable and resilient. And PIF’s portfolio is well diversified and structurally resilient. We are a long-term, patient investor.”

Even if a cease-fire is eventually reached, Saudi officials worry the eventual outcome will be an Iran that’s wounded yet still dominated by a hard-line regime that controls the Strait of Hormuz. That could leave Saudi Arabia under a cloud of uncertainty, potentially for years to come, repelling foreign investors it has increasingly been counting on for its transformation.

It would also likely force Riyadh to spend billions of dollars to bolster defenses and bail out already-limping projects, further straining a budget that’s faced growing deficits.

“Everything’s now up in the air,” Chris Johnson, an American lawyer based in Riyadh who helps foreign companies doing business there, said four weeks into the war.

Prince Mohammed is walking a thin line. He has quietly urged Washington to keep the war going until Iran’s ability to project power has been degraded, The Wall Street Journal has reported. But he also doesn’t want the war to engulf more energy infrastructure. Officially, the government says it supports a peaceful resolution.

The stakes are high. Saudi Arabia is the Arab world’s largest economy and a source of global capital and investment.

Saudi officials say they are still progressing toward a bigger and more well-rounded economy beyond oil, and that even accomplishing a portion of Vision 2030 will be a success. The country has undergone tremendous change in the past decade, as reforms have helped create a burgeoning private sector, loosened ultraconservative social strictures and tackled rampant corruption.

The country isn’t afraid to cancel some projects if they don’t make sense, Finance Minister Mohammed al-Jadaan said late last year.

“If we announce something and we need to adjust it, accelerate it and make it a priority more than others, or defer or cancel it, we will without blinking,” he said.

Veteran Saudi columnist Abdulrahman al-Rashid said the crown prince cuts his losses when plans fall short or better options emerge.

“He isn’t rushed or very much concerned with legacy, nor with media perception, unlike many leaders who get boxed in,” said al-Rashid, who was in the Saudi delegation during the prince’s Washington trip. “If 2030 becomes 2040, so what?”

The recent sharp rise in oil prices could help restore some lost revenues. Saudi Arabia is still exporting large volumes through a pipeline that carries oil to the Red Sea, bypassing Hormuz.

In the longer term, high oil prices risk pushing consumers into habits that slash their oil use, or could trigger a recession that hurts demand. The kingdom also faces the danger that Iranian-armed Houthi militants in Yemen, who halted traffic through the Red Sea during the war in Gaza, could block that route again. The Houthis attacked Israel last week, but so far haven’t targeted Saudi Arabia or Red Sea shipping lanes.

The problem is there was never enough cash to fund all his ambitious initiatives.

They included a new airline built from scratch, with about $20 billion in planes on order; investments in esports and videogame companies totaling $38 billion; a new theme-park city with the world’s tallest roller coaster at a total cost of $32 billion; a collection of 30 Maldives-style resorts in the Red Sea with $10 billion already spent; and a $100 billion AI push.

A major expansion of Riyadh’s airport is supposed to accommodate up to 120 million travelers by 2030, from 37 million in 2024. Commitments toward infrastructure to host a World Expo in 2030 and the World Cup in 2034 are expected to cost $26 billion, according to the International Monetary Fund, including a new stadium resembling a toy Transformer on a mountain edge and another that looks like a pile of crystals.

The crown prince was personally involved with many projects, particularly Neom.

Told that he liked architecture that looked like it defied gravity, Neom staff set up architectural models costing millions of dollars in a tent multiple times a year so that Prince Mohammed and other officials could choose their favorite designs as they strolled by, former Neom employees said.

The country’s projects ran into the trillions of dollars—far more than a government with a $300 billion annual budget could afford.

By last fall, work on the Line all but halted as the PIF appeared to shelve the project, former employees said. Winds are slowly blowing sand into the 75-mile trench meant to hold a bullet train, while once-bustling worker camps have turned to ghost towns, one former employee said.

A similar scene unfolded in Sindalah, a $4 billion ultraluxury island resort project at Neom. An October 2024 launch party with Will Smith and Alicia Keys proved premature, as rushed work left hotels riddled with construction problems and unable to open without hundreds of millions of dollars of fixes.

Last spring, Neom mothballed the island, while staff at numerous fancy restaurants loaded Baccarat crystal glasses and blue crocodile-skin chairs into storage, former employees said. Restaurants discarded over 50 pounds of beluga caviar likely worth tens of thousands of dollars, one said. The windswept golf course’s grass turned brown while officials await a decision on future plans.

In Riyadh, workers dug out a square pit the width of four football fields meant to hold the gargantuan cube—intended to be about 70 stories tall—that would anchor a new Riyadh downtown called New Murabba with a price tag topping $50 billion.

A giant atrium was planned inside the structure where hologram images of spaceships and floating boulders whiz by visitors. While some surrounding development may go ahead, the cube is stalled, with hopes for funding pushed years into the future, officials say.

New Murabba said in a statement that its development was “progressing in line with a phased and disciplined delivery approach,” with excavation and foundation activity “well advanced.”

Some lower-cost efforts have shown success. Domestic tourism and entertainment spending have increased as movie theaters and amusement parks, once banned, have sprouted across the country. A Riyadh development called Diriyah buzzes with activity around a hub of restaurants set next to a historic ruin, with a Trump-branded hotel planned nearby.

The Riyadh metro, which opened six lines in late 2024 after years of delays and billions of dollars of cost overruns, is regularly packed at rush hour.

Millions of women have joined the workforce, surpassing 2030 targets. The non-oil part of the economy has grown to more than half of gross domestic product.

For decades, Saudi Arabia played an outsize role thanks to its vast oil production and its special status in Islam as home to the holy cities of Mecca and Medina. But the kingdom watched its influence ebb as neighbors, especially the United Arab Emirates and Qatar, raced ahead in attracting international investors.

Prince Mohammed promised a reimagination of the kingdom’s place in the world. Once a relatively obscure royal, he outmaneuvered older cousins and purged rivals to become heir apparent as the health of his father, King Salman, declined.

He called his Vision 2030 plan, rolled out 10 years ago, “ambitious yet achievable.” He accompanied the push with reforms meant to modernize Saudi society, defanging religious police and ending a ban on female drivers.

His impetuosity, however, seriously alarmed the West. He launched a war in Yemen that went badly and imprisoned dissidents. In 2018, men in his employ murdered Jamal Khashoggi, a Saudi journalist who criticized the government. Although Prince Mohammed denied personal involvement, the CIA concluded that he likely ordered the killing.

Western leaders and investors largely shunned the prince. They started to relent in 2022 after Russia’s invasion of Ukraine sparked a global energy crunch. Trump’s re-election brought a pro-Saudi leader back into the White House.

Prince Mohammed also sought to mend fences with Iran, after earlier calling its leader “the new Hitler” and accusing Tehran of trying to encircle Saudi Arabia with hostile militias. In 2023, he restored diplomatic relations with Iran after a seven-year break in a deal brokered by China.

In an interview soon after, he said the transformation of Saudi Arabia required a stable region—including economic development in Iran.

Big U.S. companies such as Goldman Sachs, Citigroup and PwC have opened regional headquarters in Riyadh, after the government threatened to cut them off from contracts otherwise.

But foreign investment only reached $35.5 billion in 2025, according to official figures, up from previous years but well short of the 2030 goal of $100 billion.

Saudi Arabia’s debt load soared to nearly $400 billion. While still quite conservative compared with Western states at 32% of GDP, it was well above the 12% level seen a decade ago.

In October, Investment Minister Khalid al-Falih told a Riyadh financial conference that the private sector needed to take a larger role.

“It is time for us to maybe scale back on this government or PIF spending…and to let the private sector come in and start investing,” said the minister, who was later replaced.

The call went out again as drone attacks spread.

“We want to bring the whole world to come and invest in Saudi,” said Al-Rumayyan, the PIF governor, at the Miami conference. Stay tuned, he said: Updated plans for Saudi Arabia’s future growth will be revealed soon.