Saudi Arabia Breaks Record with 356 Executions in 2025 Amid ‘War on Drugs’ and Global Criticism

Saudi Arabia executed a record 356 people in 2025, up from 338 in 2024, with official figures saying 243 executions were for drug-related offences after Riyadh lifted a moratorium on death sentences for drugs in late 2022. The surge — heavily affecting foreign nationals and accompanied by reports of opaque trials, alleged coerced confessions and executions of people who were minors at the time of their alleged crimes — has triggered renewed international criticism and calls for a moratorium, raising reputational and ESG-related country risk that could influence investor sentiment toward Saudi assets and policy risk assessments.

Analysis

Market structure: The surge in executions increases political and ESG risk for Saudi assets, likely to hit sectors dependent on foreign capital and tourism (retail, hospitality, entertainment) while leaving hydrocarbon cash-generators (Saudi Aramco/energy majors) relatively insulated. Expect modest re-pricing: non-oil equities and sovereign credit could trade with a 3–7% risk premium in the first 1–3 months if international divestment campaigns gather momentum. FX impact is capped short-term by the SAR/USD peg, but sovereign bond spreads and local equity free-float liquidity are the transmission channels.

Risk assessment: Tail risks include targeted sanctions, withdrawal by major global pension funds, or a sovereign rating review—each low probability but high impact (≥100–200bp widening in Saudi CDS, ≥10% equity drawdown). Immediate window (days) is headline-driven volatility; short-term (weeks/months) sees flows and ETF reweighting; long-term (quarters) depends on policy response and whether Vision 2030 capital inflows slow materially. Hidden dependencies: KSA fiscal buffers and Aramco dividends can blunt market damage, while opaque judicial/process risks can prolong reputational outflows.

Trade implications: Expect tactical risk-off in EM/ME exposures; hedge with sovereign/EM bond shorts and buy safe-haven real assets. Specific contagion vectors: MSCI EM and EM debt ETFs, Saudi domestic-consumer names, and newly IPO’d crown-sponsored listings. Options hedge windows most attractive near 30–90 day expiries as headlines cluster.

Contrarian angles: The market may overreact—Aramco cashflows and oil receipts provide a natural backstop; a >10% sell-off in KSA equities could present a buy-on-dip for energy-heavy benchmarks. Also, defense/security suppliers and domestic security services could see durable budget tailwinds; watch visible budget reallocation as a signal to rotate.

Key Decisions for Investors

• Trim Saudi equity exposure: Reduce KSA ETF (ticker KSA) position by 30% within 2 weeks and redeploy proceeds into GLD (allocate proceeds to GLD equal to 50% of sale) to insulate portfolios from short-term ESG outflows; re-enter KSA if two consecutive months of net foreign inflows are reported or KSA ETF rallies >8% from trough.
• Hedge EM sovereign risk: Establish a 1–1.5% notional short/put position on EMB (iShares J.P. Morgan USD EM Bond ETF) for 3 months (or buy 3-month 3% OTM puts if available); unwind if EMB tightens/spread narrows by ≥25bp or EMB ETF rallies >4%.
• Protect equity beta: Buy 90-day 5% OTM put on EEM (iShares MSCI Emerging Markets ETF) sized to cover 1% portfolio equity risk, or alternatively buy a 60–90 day VIX call spread (cost-controlled) sized 0.5–1% portfolio to guard against headline-driven volatility spikes.
• Selective energy overweight: Maintain/establish a small 1–2% overweight in large-cap oil producers (2222.SR Saudi Aramco if accessible, or XOM/CVX for global exposure) through quarter-end; trim if Brent falls >6% or if sanctions/production disruptions are announced.