The Gulf’s Short-Term, Post- Conflict Foreign Policy Goals

The following excerpt is from Chapter 1 — Shifting Sands: A Middle East in Conflict and Transition.

The Iran-US-Israel conflict has shaken the “oasis” model of the Gulf states. Economic momentum has slowed, with damage to infrastructure, disrupted production, constrained exports, and a decline in tourism and business activity.^[1] For the foreseeable future, Gulf foreign policy will prioritise economic recovery and hard security above all else. While long-term strategic goals remain intact, the crisis will temporarily reorient policy toward near-term economic and defence gains, potentially at the cost of other long-term priorities.

Priorities for Economic Recovery

The crisis has exposed the Gulf ’s economic vulnerability to political volatility—a surprise for a sub-region long accustomed to peace and stability. Estimates by the United Nations Development Programme (UNDP) suggest that the Gulf Cooperation Council (GCC) states could lose between 5.2 and 8.5 percent of their Gross Domestic Product (GDP) due to trade disruptions and energy market volatility.^[2] Oxford Economics, meanwhile, downgraded aggregate GCC real GDP growth for 2026 by 4.6 percentage points, reflecting reduced oil production, exports, tourism, and domestic demand, with Qatar, Kuwait, and Bahrain most affected.^[3] It considers Saudi Arabia and Oman as less affected, likely owing to their geographic positioning and relative insulation from direct attacks. Yet even these more sheltered states will draw lessons from the resilience and recovery efforts of their neighbours.

Investment promotion agencies and advisories across the Gulf are reassuring international firms of the sub-region’s resilience despite a challenging economic backdrop.^[4] To demonstrate such resilience, Gulf states will need to redouble efforts to attract inward investment, with promotion agencies working alongside diplomatic missions to sustain market appeal. An uptick in overseas investment roadshows is likely, as the Gulf seeks to position itself as a capital destination despite damage to its security image. Gulf states are also supporting one another: the UAE and Bahrain, for instance, conducted a US$5.44-billion currency swap^[5] that ended up enabling Bahrain to provide loan deferrals^[6] and salary support^[7] to the private sector.

Sustaining the flow of expatriates and tourists will be equally important to restoring the Gulf ’s economic value proposition. The continued resumption of flights, despite ongoing disruptions, reflects this imperative. Even Bahrain, which temporarily closed its airport, saw its national carrier maintain limited operations out of neighbouring Saudi Arabia.^[8] Despite such efforts, the conflict has taken a psychological toll on foreign nationals, many of whom are reassessing whether the Gulf ’s appeal outweighs the risks of Iranian hostility.^[9] To restore confidence among the risk-averse, Gulf states will need to rebuild trust through targeted outreach to sending countries, reassuring their populations that the region remains safe and resilient.

The inward turn to shore up the economy may come at the expense of the Gulf ’s outward investment ambitions—particularly those designed to accumulate political influence rather than deliver solid financial returns. Credible reports indicate that some Gulf states are considering reversing investment pledges, pursuing divestments, and re-evaluating global sponsorship deals. Reuters has reported that the reassessment extends across global holdings, not only US assets.^[10] One illustration is the Saudi government’s reported withdrawal from a US$200-million deal with New York’s Metropolitan Opera, America’s foremost opera company.^[11] Yet, these reports likely tell only part of the story: US investments remain financially attractive, and many will stay in place. The logic underpinning any reversal is one of greater risk aversion—where the Gulf once tolerated financial uncertainty, the imperative of economic security now narrows that appetite. This reflects a broader recalibration of sovereign wealth strategy: from influence-building to domestic stabilisation.

Smaller Gulf states are more likely to redirect their sovereign wealth toward domestic economic security, given that the conflict’s economic consequences have fallen unevenly across the GCC.^[12] Larger states—Oman, Saudi Arabia, and the UAE—have alternative routes to circumvent the closure of the Strait of Hormuz, the principal source of economic disruption, via the East-West Pipeline in Saudi Arabia and the Habshan- Fujairah Pipeline. Smaller states—Qatar, Kuwait, and Bahrain—lack such alternatives, with Bahrain particularly exposed given its limited sovereign wealth buffer. This will likely generate momentum for channelling collective funds toward trade corridors that reduce dependence on chokepoints such as the Strait of Hormuz, enhancing Gulf economic security.^[13] Overland infrastructure supporting freight transport is particularly relevant here—exemplified by the plans for the GCC Rail project and the India-Middle East- Europe Economic Corridor (IMEC). Saudi Arabia has already moved to establish trade corridors redirecting goods from its Eastern Region ports and other GCC hubs to Jeddah Islamic Port and other Red Sea outlets.^[14]

Such bypasses connect Gulf exports to global markets without transiting the Strait of Hormuz, benefiting all economies reliant on Gulf energy and goods. These alternative economic corridors are likely to be framed as a shared global opportunity—and responsibility—particularly for partners in Asia and Europe who rely heavily on Gulf output. The conflict has made plain that when Gulf output suffers, the world suffers too— reinforcing the case for a foreign policy oriented toward securing economic resilience.

A Foreign Policy Calibrated for Hard Power

The Gulf States have long pursued a foreign policy centred on strategic diversification. While the US remains a cornerstone partner, there has been persistent speculation about Gulf hedging strategies involving Russia and China. That approach will now be reoriented toward what delivers immediate hard security and military capability—even at some cost to strategic autonomy—to build resilience against future threats.

All six GCC states faced a shared threat during the conflict and activated their national air defence systems in response.^[15] The prospect of an integrated GCC air defence system has gained renewed salience, alongside a deepened commitment to joint military exercises such as Gulf Shield 2026.^[16] Where integration stalls due to intra-GCC trust deficits, one course of action remains near-certain: intensified procurement of defence systems from the US and US partners.

Longstanding US-Gulf security cooperation, particularly in defence procurement, was put to the test during the Iranian attacks and proved its value. Defence procurement trends, reflected in an analysis by the International Institute for Strategic Studies, show that since 28 February 2026, the US has been joined by Australia, France, Italy, South Korea, Ukraine, and the United Kingdom in providing military assistance to Gulf states, ranging from the deployment of RAF Typhoons to anti-UAV specialist advisers.^[17] Over the next two years, Gulf states anticipate deliveries of air defence systems from Spain, South Korea, France, and the United Kingdom, supplementing traditional US imports—including surface-to-air and air-toair missiles. These partner nations share broadly compatible security and political architectures with the US, with one notable exception—Russia’s weapon exports to Saudi Arabia.^[18]

By turning to other US allies for military support, the Gulf states signal that their primary defence orientation remains firmly toward Washington. At the same time, given the US emphasis on burden-sharing, engaging allied partners serves to reduce friction with their main defence guarantor.^[19] This extends beyond the examples above to potentially include India, Pakistan, and other Asian partners. Not all partners proved equally useful during the conflict, however, lending weight to the observation by Anwar Gargash, diplomatic adviser to the UAE President, that Abu Dhabi would reassess its regional and international relationships “with clarity and precision.”20 A new realism is thus taking shape in Gulf foreign policy—one that prizes diversity and pragmatism in interstate relations above all.^[20]

This dynamic allows the Gulf states to navigate an emerging paradox. Their close alignment with the US may have lent credibility to Iran’s narrative that its attacks on Gulf countries are a direct consequence of their partnerships with Washington—and, in certain cases, with Tel Aviv. Yet that same proximity is widely regarded as indispensable, given the proven effectiveness of security cooperation with the US and its allies. The Gulf states increasingly reject the notion that distancing themselves from Washington would temper Iranian hostility, opting instead to prioritise deterrence through deeper strategic alignment.

Absent an assurance that Iran would refrain from aggression regardless of Gulf foreign policy choices, maintaining a US-aligned posture and investing in hard security capabilities remains the most reliable means of protecting the Gulf ’s home front against Iranian threats and other potential aggressors. That said, the degree to which individual states embrace this posture varies, shaped by each country’s own calibration of its relationship with Tehran. Oman stands as the most notable exception, given its longstanding policy of maintaining cordial—perhaps pragmatic—ties with the Islamic Republic.

Conclusion

The Gulf ’s response to the conflict may prove temporarily transformative, giving rise to a foreign policy defined by urgency and shaped by the pursuit of immediate, tangible returns— whether economic inflows or hard security guarantees. This, however, carries inherent risks if it solidifies into a long-term posture, particularly as their most volatile neighbour appears poised to emerge from the conflict more dangerous and destabilising than before. An excessively short-term orientation risks narrowing strategic horizons, eroding diplomatic manoeuvrability, and diminishing long-term regional influence. The primary challenge for Gulf states, therefore, is to build resilience and insulation in the near term without compromising the very foundations of the “Gulf model” that have underpinned their stability and prosperity.

Mahdi Ghuloom is Junior Fellow, Geopolitics, ORF Middle East.

Endnotes

1. The Gulf’s Short-Term, Post-Conflict Foreign Policy Goals

^[1] Pierre-Olivier Gourinchas, entry on “War Darkens Global Economic Outlook and Reshapes Policy Priorities,” The IMF Blog, April 14, 2026, https://www.imf.org/en/ blogs/articles/2026/04/14/war-darkens-global-economicoutlook- and-reshapes-policy-priorities

^[2] UNDP, United Nations, 2026, https://www.undp. org/arab-states/press-releases/escalation-middle-eastreverses- more-year-economic-growth-arab-states-regionaccording- new-un-development-programme.

^[3] “Iran War Set to Push GCC Economies into Recession,” Oxford Economics, March 30, 2026, https://www. oxfordeconomics.com/resource/iran-war-set-to-push-gcceconomies-into-recession/.

^[4] Danielle Myles, “Gulf FDI Community Defiant in the Face of War,” FDI Intelligence, March 18, 2026, https:// www.fdiintelligence.com/content/b725ee9a-8243-4fa1- afbb-567623bf2c1c.

^[5] “UAE, Bahrain Sign $5.4bn Currency Swap to Boost Financial Cooperation,” Arab News, April 9, 2026, https:// www.arabnews.com/node/2639326/business-economy.

^[6] Central Bank of Bahrain, Government of Bahrain, 2026, https://www.cbb.gov.bh/media-center/central-bank-ofbahrain- announces-loan-deferral-program-with-7-bhdbillion- liquidity-support/.

^[7] “BD 94 Million Support for 105,000 Workers,” The Daily Tribune, April 22, 2026, https://www.newsofbahrain.com/bahrain/131202.html.

^[8] Gulf Air, Gulf Air Group, 2026, https://www.gulfair. com/about-gulf-air/media-center/Gulf-Air-Expands- Temporary-Operations – v i a -Dammam-Opens – Commercial-Bookings-for-International-Flights.

^[9] Dalia Ghanem, “The End of the Gulf ’s Gilded Age?,” German Marshall Fund, April 1, 2026, https://www.gmfus. org/news/end-gulfs-gilded-age.

^[10] Andrew Mills, Rachna Uppal and Federico Maccioni, “Gulf Trio Review Sovereign Investments to Offset Iran War Impact, Official Says,” Reuters, March 11, 2026, https://www.reuters.com/world/middle-east/some-gulfstates-reviewing-sovereign-investments-offset-economicshock-iran-war-2026-03-11/.

^[11] Adam Nagourney, “Met Opera’s Multimillion-Dollar Deal with Saudis Falls Through,” New York Times, April 23, 2026, https://www.nytimes.com/2026/04/23/arts/music/ met-opera-saudi-deal-funding.html?unlocked_article_ code=1.dFA.ZpXC.fLKEWGTRWfVz&smid=nytcoreios-share.

^[12] Justin Alexander, “The Gulf ’s Economy is Holding its Breath,” AGBI, March 6, 2026, https://www.agbi.com/ opinion/economy/2026/03/the-gulfs-economy-is-holdingits- breath/.

^[13] Andrew Leber and Sam Worby, “Three Scenarios for the Gulf States After the Iran War,” Carnegie Endowment for International Peace, April 16, 2026, https:// carnegieendowment.org/emissary/2026/04/gulf-statesgcc- iran-war-three-scenarios.

^[14] “Saudi Arabia Launches Initiative to Reroute Gulf Cargo to Red Sea Ports,” Arab News, March 13, 2026, https:// www.arabnews.com/node/2636228/saudi-arabia.

^[15] Leber and Worby, “Three Scenarios for the Gulf States After the Iran War”.

^[16] Neil Quilliam and Kristian Alexander, “Iran and Gaza Conflicts Teach Gulf States a Hard-power Lesson,” Chatham House, March 16, 2026, https:// www.chathamhouse.org/publications/the-worldtoday/ 2026-03/iran-and-gaza-conflicts-teach-gulf-stateshard- power-lesson.

^[17] Albert Vidal Ribe, “Defending the Skies of the Arab Gulf States,” IISS, March 18, 2026, https://www.iiss.org/onlineanalysis/ online-analysis/2026/03/defending-the-skies-ofthe- arab-gulf-states/.

^[18] Maryna Lishchuk, “Saudi Arabia Bought Billions of Dollars Worth of Weapons from Russia,” European Foundation for Democracy, January 25, 2025, https://www. europeandemocracy.eu/news/saudi-arabia-boughtbillions- of-dollars-worth-of-weapons-from-russia/.

^[19] Hana Elshehaby, “Gulf Security Beyond Guarantees,” Middle East Council on Global Affairs, April 5, 2026, https://mecouncil.org/blog_posts/gulf-security-beyondguarantees/.

^[20] Huda Ata, “UAE to Reassess Global Ties after Iran Aggression, Gargash Says,” Gulf News, April 10, 2026, https://gulfnews.com/uae/uae-to-reassess-global-tiesafter- iran-aggression-gargash-says-1.500502435.

2. The Economic Implications of the Middle East Crisis: Measuring Preparedness in the MENA

1 World Bank Group, “Classification of Fragile and Conflict-Affected Situations,” Brief, World Bank, 2024.

2 International Monetary Fund, World Economic Outlook. Global Economy in the Shadow of War, April 2026, https:// www.imf.org/en/publications/weo/issues/2026/04/14/ world-economic-outlook-april-2026.

3 International Monetary Fund, Regional Economic Outlook. Middle East and Central Asia. War in the Middle East: Spillovers and Policy Challenges, April 2026, https://www.imf. org/en/publications/reo/meca/issues/2026/04/16/regionaleconomic- outlook-middle-east-central-asia-april-2026.

4 The figures are synthesis from different datasets; see Growth Lab, “Rankings,” The Atlas of Economic Complexity, Harvard Kennedy School, 2024, ; World Bank, “Total Reserves (Includes Gold, Current US$),” 2024, https:// data.worldbank.org/indicator/FI.RES.TOTL.CD; World Bank, “Energy Imports, net (% of energy use),” 2022, https://data.worldbank.org/indicator/EG.IMP.CONS. ZS?locations=TN-MA-LB-DZ-PS-LY-EG-SY-JO-SD-YEIQ; “General Government Gross Debt, Percent of GDP,” International Monetary Fund, 2026, https://www.imf. org/external/datamapper/GGXWDG_NGDP@WEO/ OEMDC/ADVEC/WEOWORLD; “General Government Net Lending/Borrowing. Percent of GDP,” International Monetary Fund, 2026, https://www.imf.org/external/ datamapper/GGXCNL_NGDP@WEO/OEMDC/ADVEC/ WEOWORLD. For general government gross debt and net borrowing, 2024 is the last year where data is available for a clear majority of studied countries, while 2022 is the last year where data was available for most countries for net energy imports as share of total use.