Oil price uncertainty – that is, greater unpredictability about future oil prices – is significant for oil exporters independently of whether today’s price rises or falls. This paper investigates how oil price uncertainty affects Saudi Arabia’s economy, using quarterly data from 2010 to 2024 and a Bayesian VAR model with stochastic volatility. Empirical results show that a surge in oil price uncertainty, such as the ones observed during the 2014 oil price crash and the COVID-19 pandemic, lowers aggregate real GDP, worsens the trade balance through falling oil exports, and raises domestic prices.
