DUBAI, United Arab Emirates — After weathering unprecedented attacks from Iran, the wealthy Gulf states are now stuck between war and peace as talks stall and the Strait of Hormuz remains all but closed, threatening economic recovery.
Iran has hit Gulf energy exports with its blockade of the strait, while its attacks have caused damage to energy infrastructure that could take months or more to repair.
Even as a shaky ceasefire holds, the threat of renewed strikes looms over the region’s economy beyond oil, threatening diversification ambitions in the Gulf, long touted as a safe haven for visitors and business.
It is unclear whether stalled talks, so far centered around the strait and uranium enrichment, will produce a deal addressing the Gulf’s main concerns: stripping Iran of its control over the key waterway and keeping its missiles and proxies in check.
The longer the Gulf’s fate remains uncertain, the longer economic recovery will take, and analysts warn that the traditional US allies will struggle to influence Washington’s decisions when it comes to war and peace.
‘Huge blows’
“If this goes on for quite a long time with the Strait of Hormuz blocked, some of those states are going to suffer huge blows. And they already have,” said Dania Thafer, director of the Gulf International Forum research institute.
Qatar has already stopped liquefied natural gas production and, along with energy producers in Kuwait and Bahrain, declared force majeure.
In Dubai, unusually light traffic and deserted tourist areas tell the tale of a city still waiting for a return to normality.
Weeks into a fragile truce, the initial shock has subsided, with children returning to school in the UAE and Qatar after more than a month of distance learning.
But some are still following classes online after many families fled. UAE schools have put drills in place for security incidents.
‘Worst-case scenario’
The Hormuz blockade has exposed most of the Gulf’s dependence on the key waterway.
But even for countries like the UAE and Saudi Arabia, which have access to pipelines that allow some of their exports to bypass the waterway, diversification efforts are at risk.
Stability is key to attract talent and tourists, but also achieve their goal of becoming major hubs for artificial intelligence expertise and data centers.
“The US has really opened a Pandora’s box for the Gulf states,” Thafer said.
If Iran is allowed to maintain “a veto over their economies indefinitely” through its control of Hormuz, she added, that would be “an extremely challenging and vulnerable situation for the Gulf.”
Israel is not at the negotiating table and could still upend any deal.
“Is Israel going to continue to ‘mow the lawn’ in Iran?” Thafer asked, referring to the strategy of repeated, periodic attacks. “And is Iran going to turn around and close the Strait of Hormuz or attack the Gulf states’ economies?”
“This is the worst-case scenario: instability ensuing around the Gulf states and no end to this crisis,” she said.
‘Face-saving exit’
Gulf states remain divided over the war and on Iran. The UAE, which Iran has struck most frequently, has had a more hawkish stance and expressed maximalist demands for any deal, while Saudi Arabia has supported mediator Pakistan’s efforts.
“Iran had a calibrated strategy: striking Gulf states to different degrees and creating varying degree of threat perceptions toward Iran,” Thafer said.
And despite close ties to United States President Donald Trump, who was given a hero’s welcome last May during his Gulf tour, the monarchies have found themselves on the sidelines of the talks despite being in the firing line.
“The Gulf states have struggled to shape the Trump administration’s behavior toward Iran,” said Hasan Alhasan of the International Institute for Strategic Studies.
“They did not want the US to initiate war against Iran — which it did — and it’s no surprise that they are unable to get Washington to prioritize their own security interests in the negotiations,” as Trump seeks what Alhasan called a “face-saving exit.”
