The U.S. and Iran have resumed military strikes — trapping America’s partners in the Middle East in volatility that could hurt their economies for years to come.
U.S. Central Command on Sunday launched the first American strikes on Iranian forces in more than a month, saying the targets posed “an imminent threat” to civilian shipping through the Strait of Hormuz. Tehran launched retaliatory missiles at American forces in Jordan hours later. The renewed violence came after the Trump administration had argued it was weakening Iran’s grip on the strait and bolstering energy shipments through the crucial waterway by deploying U.S. naval forces. The administration has also applied unprecedented sanction pressure on the country, which led analysts to predict Iran would retaliate. Now, experts believe that the potential for tit-for-tat strikes will continue even if all-out conflict is avoided.
“Both sides are now settling in for a long U.S.-Iran war,” Richard Fontaine of the Center for a New American Security think tank wrote on X. “The best bet now is on a protracted economic contest, enforced largely but not exclusively through military means.”
American allies in the region have sold themselves in recent years as reliable, safe and business-minded nations. But the U.S.-Iran war has challenged that narrative as those same allies have faced Iranian attacks on U.S. bases they host, arrangements once seen as a measure of security against such attacks, as well as their own infrastructure.
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The new strikes are, for countries like Saudi Arabia, Qatar and the United Arab Emirates, “a continuation of a risky stalemate,” Anna Jacobs Khalaf, a fellow at the Arab Gulf States Institute think tank, told NOTUS. “Gulf states are under no illusions anymore about their influence with Trump. They will always try and lobby for de-escalation … [but the] bottom line is that there is very little trust left in this U.S. administration.”
That stalemate threatens those countries’ efforts to attract outside investment and to develop significant revenue streams beyond exporting fossil fuels. Semafor reported Sunday that plans for three Saudi companies to raise money through initial public offerings have been shelved, signaling shrinking expectations of attracting foreign money. The opening of a multibillion-dollar branch of the Wynn Resorts empire in the U.A.E. has been postponed, and hiring there has seen its sharpest drop since the early months of the pandemic. And Qatar has cut funding for government departments and aid.
Several major events in the Gulf countries, including multiple F1 races and conferences, were postponed in the early weeks of the war. While other high-profile gatherings that are expected to draw thousands of attendees, like Qatar’s Doha Forum and a crypto conference in Dubai, remain on the calendar, those planning to attend the events said they regularly discuss possible delays or disruptions.
Middle Eastern policymakers, particularly those from nations with deep pockets, had expected geopolitical matters like long-standing, unresolved U.S.-Iran animosity would be secondary to economics for Trump.
“The big failed bet from all these Gulf states was they bet the Trump administration cared more about making money … Ultimately, Trump reached a place where he cares more about not conceding a loss to Iran than he cares about the entire economy of the region going down the tube,” said Andrew Leber, a professor at Tulane University.
A White House official said in an email that Trump has “extraordinary relationships with all of our Gulf partners.”
“President Trump has always been clear that his preference is diplomacy. Unfortunately, Iran chose the path of violence by killing American troops, committing international acts of terrorism, and lashing out at its neighbors in the region — and the Commander-in-Chief ensures that they reap the consequences,” the official continued.
Regional governments and royal families are simultaneously entangled in Trump’s personal financial interests and his promises of delivering prosperity for Americans. Saudi Arabia’s Public Investment Fund put $2 billion into a private-equity fund run by Trump’s son-in-law and adviser Jared Kushner, a firm in which Qatar and the U.A.E. have also invested hundreds of millions of dollars. World Liberty Financial, the cryptocurrency business driven by the families of Trump and his adviser Steve Witkoff, is preparing to launch a bank whose largest stake belongs to Emirati royal Sheikh Tahnoon bin Zayed al Nahyan. Meanwhile, Trump has claimed he has secured over $2 trillion in Gulf investments for America.
“The thing about investing this money is: You can give the money and hope … but you have to be willing to cut off the money or otherwise impose costs if they don’t do what you want,” Leber said, noting no Arab state has threatened Trump with withdrawing any of those investments.
Though already wealthy, those countries want to ensure they remain so, by preserving the social contracts that allow autocratic families to rule and avoiding instability.
“Gulf leaders expected those enormous commitments to deliver security, access and strategic predictability,” Abdullah Baabood, a scholar of international relations at Waseda University in Japan, told NOTUS. But instead, the war is “damaging precisely the sectors their diversification strategies depend on: tourism, aviation, logistics, investment and non-oil industries,” he wrote in a text message.
Leber noted that big investments by international companies in sectors the Gulf states focused on, such as data centers, have not been announced this year, in contrast to 2025.
“I don’t think people who have invested time and money in these countries are going to bolt. It’s just harder to attract the next generation of firms and investments to the region,” Leber said.
The entertainment and tourism sectors are among those most directly stymied by the ongoing conflict, he noted. Though their direct contributions to national economies are smaller than those of other sectors, countries like Saudi Arabia had hoped growth in those areas would soften their global reputation and counter long-standing perceptions that they are too conservative for foreigners’ comfort.
“There’s a strong effort to try to go against the image that we cannot host any events,” said Aziz Alghashian, a fellow at the Gulf International Forum. “The Saudis and others, they’re far more wary of image and perception than before … they will have to work a lot harder in showing there is more investment and there’s room for investment.”
Baabood argued that “governments can continue building hotels, resorts and venues, but they cannot easily compensate for weaker international demand.”
Riyadh previously addressed unexpected regional flare-ups like the war in Gaza from 2023 onward by emphasizing its agility and ability to quickly shift its plans, Alghashian said. And Leber noted Gulf governments generally have preserved enough reserves of capital to sustain them through “a year or two of turbulent times.”
Still, both analysts highlighted long-term concerns. The Iran war has sapped decision-makers’ time and energy and interrupted their planning, Alghashian said — and driven a rethink that could leave the U.S. less influential in the region.
Even as the Trump administration argues it’s isolating Tehran economically, Gulf states may soon base their planning more on fellow countries in the region — including Iran — than the U.S.
“Accommodation with Iran is increasingly not just a foreign-policy preference,” Baabood said. “It’s an economic-security necessity.”
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