(Sept 1): Saudi Arabia is set to sell dollar bonds, as the country increases borrowing to counter the impact of the Iran war on its economy.

The kingdom is offering two tranches of benchmark-sized dollar sukuk, with five and 10-year maturities, according to a person familiar with the matter. The order book for the sale stood at more than US$9 billion (RM36.32 billion), excluding lead managers’ interest.

Initial price thoughts are around 100 basis points over US Treasuries for the shorter tranche and 110 basis points for the longer one. The final details, including the size of the bonds and the price, may be decided later on Tuesday, the person said.

Saudi Arabia is separately in early talks to raise at least US$8 billion from a fresh loan, Bloomberg reported on Monday.

The sale comes at a time when nations in the Persian Gulf are grappling with the impact of the Iran war and disruption to the Strait of Hormuz, a crucial route for oil and liquefied natural gas trade. Two oil supertankers attempting to navigate the chokepoint were struck late Monday, maritime security consultant Marisks said.

The Saudi economy posted its deepest quarterly contraction since the Covid-19 pandemic in the second quarter, driven by a sharp downturn in its critical oil industry. Tehran and its proxies have also sporadically struck US allies across the region, including Saudi Arabian energy facilities. 

Saudi Arabia said in May it had completed its annual borrowing plan, securing roughly 90% of its funding needs. Any additional requirements, finance authorities said, would be met primarily through private channels and local markets.

The kingdom has emerged as one of the most active emerging-market borrowers, raising about US$6 billion in domestic and international bonds this year, while state-backed oil major Aramco has raised another US$4 billion. Its sovereign wealth fund raised US$7 billion in May, one of the first public-market deals since the Iran war began.

JPMorgan Chase & Co said it plans to add Saudi Arabia’s local-currency bonds to its widely followed benchmark emerging-market index in early 2027, a move that would help the kingdom attract more foreign portfolio investment.

Citigroup Inc, Goldman Sachs Group Inc, HSBC Holdings plc, JPMorgan Chase & Co and Standard Chartered plc are the main banks arranging Saudi Arabia’s latest bond deal.

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