Summary

Six months into the war between the United States and Iran, Arab states are facing a difficult new reality as the conflict shows no clear sign of producing either regime change in Tehran or a decisive victory for Washington. Analysts broadly expect the conflict to become a prolonged period of stagnation and attrition rather than end with a clear winner. The war began with surprise Israeli and US attacks on Iran on February 28, with Washington initially hoping that mounting economic and military pressure would force a fundamental change in Tehran. Six months later, that outcome appears increasingly unlikely, leaving governments across the region preparing for a drawn-out conflict and its consequences. Oil-dependent economies have been particularly exposed. Traffic through the Strait of Hormuz has fallen sharply after Iranian attacks on shipping and a US blockade of Iranian ports, disrupting oil, refined products and liquefied natural gas shipments. Although the intensity of fighting has declined since Washington and Tehran signed a memorandum of understanding in June, the conflict has not ended and uncertainty continues to weigh on the region. The prolonged war is also reinforcing existing regional tensions. The confrontation involving Houthi rebels and Saudi Arabia in Yemen could intensify, while China and India continue expanding their influence in the Middle East and North Africa. China’s Belt and Road Initiative is already deeply established across the region, and Arab states increasingly recognize that formal security relationships with outside powers do not necessarily guarantee protection. A recent defense agreement between Turkey, Pakistan and Saudi Arabia, signed in Mecca, could therefore become the first of a series of new military arrangements among regional powers. “The war has just accelerated trends, but hasn’t really started anything that wasn’t already under way,” said Sanam Vakil, director of the Middle East and North Africa Programme at Chatham House. Gulf states had already been diversifying their economies and exploring defense partnerships beyond their traditional reliance on US security guarantees, while also seeking to strengthen their own military capabilities. Israel, meanwhile, continues to pursue what analysts describe as a project of regional “paramountcy,” despite failing to force Iran into collapse during the current conflict. HA Hellyer of the Royal United Services Institute said a fall of the Iranian government in the next six months was highly unlikely. “There is no chance of the government in Tehran falling in the next six months,” Hellyer said, adding that sustained economic pressure could theoretically contribute to a wider crisis and eventually state collapse, but that such an outcome would likely take years rather than months. The disruption of the Strait of Hormuz and attacks on cities across the region have created serious problems for Gulf states seeking to use oil revenues to diversify their economies and strengthen their image as secure destinations for international investment. Oil shipments, petroleum products and LNG have repeatedly faced major disruptions since the US and Israeli attacks began in February. The situation around the Bab al-Mandeb Strait has also deteriorated. Shipping in the strategic waterway was already threatened by Houthi attacks during the war in Gaza, and in July the Iran-aligned group announced a naval blockade of Saudi Arabia. The economic consequences are becoming increasingly difficult to predict. John Sfakianakis, chief economist at the Gulf Research Center, said higher oil prices had broadly reflected the Gulf states’ difficulties in exporting crude. “Is this going to go for six months? Is it going to go on for longer?” he asked, highlighting the uncertainty facing the region. Higher oil prices have not eliminated the economic pressure, as inflation has also risen. At the same time, Gulf governments are facing growing demands to increase defense spending as they reassess their security needs. For now, most Arab states caught between the major powers are likely to focus less on resolving the conflict and more on adapting to continued instability. The war has accelerated shifts that were already underway, pushing governments to diversify their economies, strengthen independent defense capabilities and broaden their partnerships as they prepare to manage a period of prolonged regional uncertainty.