Six-month Iran-US conflict pushes Gulf states into economic strain and new defence ties
Six months after the US and Israel launched attacks on Iran, the war shows no sign of ending, leaving Arab nations to grapple with economic shocks and heightened security concerns.
Analysts agree that the United States and Israel’s war on Iran will not topple Tehran’s regime nor deliver a swift victory, but will instead settle into a protracted stalemate. The hoped-for structural shift in Iran has not materialised, and the conflict’s intensity has eased only after a memorandum of understanding was signed in June, yet no clear endpoint is in sight. Oil-dependent Gulf economies continue to absorb supply shocks as traffic in the Strait of Hormuz remains at pre-war lows, while attacks on shipping in the Bab al-Mandeb have further complicated trade routes.
Rising oil prices are offset by higher inflation, prompting calls for greater defence spending and new security pacts, such as the recently signed Turkiye-Pakistan-Saudi agreement in Mecca. Experts from Chatham House and the Royal United Services Institute stress that the war is amplifying pre-existing trends of economic diversification and broader defence partnerships beyond traditional US guarantees. Meanwhile, the Houthi-Saudi naval blockade and lingering tensions in Yemen add to the region’s volatility, leaving Arab states to manage both economic fallout and evolving security dynamics.
Why it matters
The ongoing Iran-US war threatens global oil supplies and forces Middle Eastern countries to reshape their economies and security alliances.
How this story developed
- Jul 20 U.S. and Iran intensify air strikes over Strait of Hormuz, diplomacy stalls
- Aug 25 Iranian rial fell to a record 2.02 million per US dollar.
- Aug 25 President Trump held an impromptu press briefing focused on construction projects rather than the Iran conflict.
- Aug 25 The Treasury listed about 60 Iranian individuals, entities and vessels for sanction and detailed secondary penalties for foreign firms.
- Aug 25 A senior Pakistani delegation met with Iran's president in Tehran for talks described as very positive.
- Aug 25 The United States announced sanctions on roughly 60 Iran‑linked parties.
- Aug 25 Somali pirates captured six merchant vessels across the Gulf of Aden and western Indian Ocean since April.
- Aug 25 Oman’s foreign ministry said its senior diplomat met Iran’s foreign minister to discuss a temporary navigation corridor and joint mine‑clearance.
- Aug 26 Iran reiterated that the Strait of Hormuz will remain closed despite ongoing negotiations with Oman.
- Aug 27 Iran and Oman concluded preliminary negotiations on a revenue‑sharing framework for Strait of Hormuz traffic.
- Aug 27 President Trump spent a White House press briefing largely describing construction projects and avoided mentioning the Iran war.
- Aug 27 China issued a warning that it will retaliate if any Chinese entity is hit by the new sanctions.
- Aug 28 Munir’s scheduled Tehran visit was announced alongside the summit meeting with the U.S. vice president and Pakistan’s request for a large stabilization fund.
- Aug 28 Qatar’s prime minister traveled to Tehran for high‑level talks on a Hormuz shipping corridor.
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