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For decades the fossil fuel-rich Gulf states have marketed themselves to investors, businesses and tourists as islands of stability in the otherwise volatile Middle East. But after the US and Israel launched their war against Iran over the weekend, Tehran has lashed out by firing waves of missiles and drones at the region, which is home to several American military bases. It is the nightmare scenario Gulf leaders have long feared.
Ever since the 1979 Islamic revolution, the Gulf has considered Iran a malign force. In recent years, they have sought to manage the relationship by de-escalating with Tehran and bolstering diplomatic relations. As US President Donald Trump stepped up his threats against the Islamic republic, regional officials publicly stated that they would not allow their territory to be used to attack their neighbour. The message was clear: they wanted to stay out of a conflict they had urged the US to avoid. But once Trump and Israeli Prime Minister Benjamin Netanyahu ignited the war, and assassinated supreme leader Ayatollah Ali Khamenei, Iran has dramatically raised the stakes by targeting the US’s Arab allies.
Tehran has struck military sites, US embassies, economic infrastructure and civilian buildings. At least a handful of people have been killed and hundreds injured. Airports were closed and airlines grounded. A defining image of Tehran’s reckless retaliation was that of projectiles streaking across the skyscraper-laden night sky of Dubai in the United Arab Emirates, the region’s pre-eminent trade and tourism hub. Expats that came for the sun and low taxes were suddenly exposed to a version of the Middle East they did not bargain for.
In Saudi Arabia, which has been desperate to lure foreign investment to help diversify its economy, Iranian drones struck its largest oil refinery and the US embassy in Riyadh. Neighbouring Qatar, one of the world’s top exporters of liquefied natural gas, halted LNG production after its energy facilities were targeted. Shipping through the Strait of Hormuz — a vital choke point for global commodities — has also ground to a halt.
Iran may have calculated that high-profile attacks would pressure the US to de-escalate. Instead, they have angered Gulf leaders who had lobbied for a diplomatic solution. For now, their air defence systems appear to be taking out most of the projectiles. How long they can continue to do so will depend on the duration of the war, their ability to replenish stocks of air defence interceptors and Iran’s capacity to sustain its attacks under relentless bombing. Gulf leaders are also considering whether to take more offensive steps.
Although businesses are exploring contingencies, planned vacations are being cancelled, and tourists are trying to find flights home, it is too early to gauge the long-term consequences to the region’s economic image. It is, however, clear that Trump and Netanyahu’s lack of clear goals and the absence of planning for a postwar Iran has created dangerous unpredictability. If the US halts the conflict with the regime intact, Gulf states will have a wounded tiger on their doorstep that has proven itself able and willing to strike at capitals. If the regime collapses, they could have another failed, fragmented state in their backyard. A stable transition to a more moderate, friendlier government in Iran seems unlikely.
The Gulf has done its best to project calm and the UAE, in particular, has a knack for regeneration. But even if there is a miraculous, rapid de-escalation, Iran’s attacks this week have shown the world that the Gulf is not insulated from the fragility and conflict that has plagued much of the rest of the Middle East. The region’s brand is likely to survive, but its sheen may be wearing off.