["Middle East Policy, Volume 33, Issue 3, Autumn (Fall) 2026. ", "\nAbstract\nThe 2026 Iran War and Tehran's retaliatory strikes across the Gulf have exposed how conflict can disrupt Saudi Arabia's economic diversification by increasing uncertainty, reshaping fiscal priorities, and reinforcing dependence on hydrocarbon revenues. This article contends that geopolitical risk has become a persistent structural constraint on Riyadh's strategy. Combining regional‐security analysis with frequency‐domain causality testing, the study demonstrates that instability affects reform efforts in the long run through oil‐price volatility, weakened investor confidence, and financial uncertainty. The evidence shows that instability in the Gulf region and the broader Middle East redirects fiscal priorities away from diversification and toward security spending and stabilization measures. These factors combine to reinforce dependence on hydrocarbons and complicate the objectives of Saudi Vision 2030. The study concludes that sustaining the transformation strategy will depend not only on domestic economic reform but also on reducing regional tensions through engagement with major external powers, as well as security cooperation and more stable relations with neighboring states.\n"]