The Bush administration has notified the US Congress that it intends to go ahead with a major sale of sensitive military technology to Saudi Arabia.
Mr Bush's limousine was given a mounted escort in Riyadh
It made the announcement just hours after US President George W Bush began his first visit to the kingdom, as part of a tour of Gulf Arab allies.
The laser-guided bomb technology sale is worth $123m (£63m).
Meanwhile Mr Bush said he was talking to King Abdullah about the effect of high oil prices on the US economy.
Saudi Arabia is the world's biggest oil exporter and a leading member of oil producers' cartel Opec.
"I would hope that as Opec considers different production levels that they understand that if... one of the biggest consumers' economy suffers it means less purchases, less oil and gas sold," Mr Bush said.
The White House said US Secretary of State Condoleezza Rice, who has been accompanying Mr Bush on his Middle East tour, had arrived in Baghdad for meetings with Iraqi political leaders.
Behind closed doors
Mr Bush is believed to have stayed up late on Monday for talks with King Abdullah at his palace in Riyadh.
What happens in Saudi Arabia happens for the most part behind closed doors so there has been little detail of Mr Bush's visit so far, says the BBC's Matthew Price who is travelling with him.
As well as oil prices, Israeli-Palestinian talks and democracy probably featured in the president's initial discussions with the king, but when tensions over Iran's nuclear activities came up, it was apparently not for long, our correspondent adds.
The 900 satellite-guided Joint Direct Attack Munitions being sold to Riyadh are part of a long-awaited US arms package for Gulf Arab allies worth $20bn.
King Abdullah awarded Mr Bush the Saudi Order of Merit
In Washington, Democrats signalled they were unlikely to block the deal, though some in Congress expressed fears that some of the technology being sold could threaten Israel, the BBC's Jonathan Beale in Washington reports.
The chairman of the Senate Foreign Relations Committee, the Democrat Joe Biden, said Congress needed to be convinced that the sale made sense militarily, and would not harm the security of America and its allies.
US state department spokesman Sean McCormack said that both the Saudi and Israeli governments had been consulted and Washington was ensuring Israel retained a "qualitative military edge".
Analysts suggest that Congress will back the arms sale because it would bolster the Saudis in the face of Iran.
Tehran has been described by House Foreign Affairs Committee chairman Tom Lantos, a Democrat, as a "mortal threat" to the region, should it acquire nuclear weapons.
While there was no immediate Iranian reaction to news of the arms sale, Foreign Minister Manouchehr Mottaki recently accused Mr Bush of using his Gulf tour to "create an atmosphere of Iran-phobia in the region".
Mr Bush is due to visit the Saudi king's horse farm with its Arabian stallions on Tuesday - the US president has hosted the Saudi monarch at his own ranch in Texas in the past.
King Abdullah's lavish farm is reported to provide air-conditioned stables and aqua-therapy for the horses.
Correspondents say that while both governments are eager to contain Iran's growing regional influence, they differ on the best way of doing this.
In contrast to Washington's tough line on Tehran, the Saudis are said to want to explore how far they can deal with the Iranians, with previously tense Saudi-Iranian relations improving in recent months.