Middle East
Gulf states signal investment review as Iran conflict strains budgets
The economic fallout from the US-Israeli campaign against Iran is placing severe strain on the budgets of Gulf nations.
The region’s leading economies have initiated a review of their overseas investment commitments and contractual obligations to mitigate the escalating financial burden.
As stated to the Financial Times, a Gulf official indicated that the scope of this review is broad, encompassing everything from capital commitments to foreign states and corporations to sports sponsorships, service contracts, and asset divestitures.
The official noted that Saudi Arabia, the United Arab Emirates, Kuwait, and Qatar are collectively assessing the pressure on their national budgets and economies, though they declined to name specific participants in the talks.
“A number of Gulf nations have launched internal assessments to determine whether force majeure clauses can be invoked in existing contracts. Simultaneously, both current and future investment commitments are under review. The objective is to alleviate some of the economic pressures anticipated from the ongoing war,” the official said, adding that these measures will gain further significance if the war—and its associated expenditures—continues at the current intensity.
Energy revenues slump as defense spending surges
According to the official, these preemptive measures are a direct response to mounting budgetary strain.
Fiscal balances in the Gulf are being tested by a combination of declining energy revenues—driven by slowing production and logistical disruptions—as well as downturns in the tourism and aviation sectors, compounded by a sharp rise in defense spending.
A separate official, serving as an advisor to a Gulf government, indicated that the prospect of these wealthy nations reviewing their investments has drawn the attention of the White House.
Saudi Arabia, the United Arab Emirates, and Qatar manage among the largest and most active sovereign wealth funds globally. Following a visit to the region by US President Donald Trump last year, these nations had pledged hundreds of billions of dollars in investment into the US.
Gulf states are also major financiers of global sporting events. Domestically, these nations have been executing large-scale investments to diversify their economies and accelerate development.
Investment shifts may increase pressure on Washington
Moves that could impact investments in the US or other Western nations are viewed as a potential lever to increase pressure on President Trump to seek a diplomatic resolution to end the war.
The oil-rich Gulf nations are indirectly involved in the war initiated by the US and Israel against Iran. In response, the Tehran administration has struck back hard against Washington’s regional allies.
Following the outbreak of hostilities, maritime traffic through the Strait of Hormuz—the conduit for approximately 20% of global oil and natural gas shipments—has largely ceased. At least 10 oil tankers have been reported attacked in the Gulf.
Qatar, the world’s second-largest producer of liquefied natural gas (LNG), was forced to declare force majeure this week after suspending production following a drone strike on its primary LNG facility. One of Saudi Arabia’s largest oil refineries was also targeted.
Infrastructure and diplomatic sites struck in the Gulf
Iran has also targeted US military bases and embassies in the region, in addition to airports, hotels, and residential buildings, causing significant disruption to air traffic and tourism.
Before the war began, Gulf nations had urged the Trump administration to avoid striking Iran and to seek a diplomatic solution. However, these nations have borne the brunt of Iran’s retaliation.
Khalaf Al Habtoor, a prominent business leader in the United Arab Emirates, expressed the growing frustration in the region via social media in a direct address to President Trump:
“A direct question: Who gave you the authority to drag our region into a war with Iran? On what basis did you make this dangerous decision? Before pulling the trigger, did you calculate the consequences?”
Al Habtoor recalled that Gulf nations have been cited as primary financiers for President Trump’s plan for the reconstruction of Gaza and were expected to support broader initiatives dubbed the “Peace Committee.”
Noting that Gulf nations have contributed billions of dollars to support stability and development, Al Habtoor added, “Today, these nations have the right to ask: Where did this money go? Are we financing peace initiatives, or a war that puts us in danger?”
These developments may have significant consequences not only for the economy but also for the regional security architecture. Reports are mounting that the bond of trust between Washington and the Gulf states has been weakened by the war.
An analysis published in Foreign Policy suggests that Iran’s attacks could fundamentally fracture the security relationship between the US and the Gulf.
FP: “The US could lose the Gulf”
In an analysis titled “The US Could Lose the Gulf,” authored by George Washington University professor Marc Lynch, it is argued that Iran’s attacks on Gulf nations could radically alter regional security dynamics.
According to the analysis, Iran’s targeting of the United Arab Emirates, Bahrain, and other Gulf states has effectively ended the diplomatic rapprochement between Saudi Arabia and Iran established in recent years.
The analysis states that Iran’s strategy is not limited to military retaliation; it is also designed to create regional and global economic pressure by exposing the vulnerability of Gulf states.
According to Lynch, Tehran aims to exhaust Gulf and US air defense systems with low-cost drones and missiles, while simultaneously seeking to create severe volatility in global energy markets by exerting pressure on the Strait of Hormuz.
Another point highlighted in the analysis is the erosion of Gulf confidence in the US. While the regional security architecture has long relied on security guarantees provided by Washington against Iran, the recent attacks have severely shaken this premise.
According to Lynch, Gulf administrations hold the view that the war initiated by the US and Israel against Iran was launched without adequate consultation, despite the fact that it directly impacts their national interests.
The failure of the US to provide effective protection against Iran’s attacks on oil facilities, ports, and energy infrastructure has deepened the loss of trust in the region. The analysis also draws attention to concerns that Gulf nations are rapidly depleting their stocks of interceptor missiles, with the US unable to replenish this capacity in the short term.
This situation has led to the US military presence—long viewed as a security guarantee—being regarded in some Gulf capitals as a source of potential risk rather than a security asset.
According to the analysis, Iran’s attacks have severely eroded the belief among Gulf states that Washington will protect them during regional crises.
Middle East
France explores Syrian transit routes as alternative oil corridor to bypass Strait of Hormuz
France is evaluating the creation of alternative energy routes through Syria to mitigate potential disruptions in the Strait of Hormuz following the resumption of hostilities between the United States and Iran. French Foreign Minister Jean-Noël Barrot stated that Paris is working on new transit routes for the transport of Persian Gulf oil, with Syria emerging as a prominent option in this context.
“Among the initiatives we have pursued since the beginning of this crisis is the concept of preparing alternative routes, in order to avoid remaining dependent on blockages that could occur here or there,” Barrot said.
Barrot indicated that Syria, which has entered a process of reunification following the collapse of the Bashar al-Assad administration, could become a “new regional hub.” The French minister characterized the country as a strategic corridor that could transport Persian Gulf oil to the Mediterranean, thereby reducing the impact of potential shipping disruptions in the Strait of Hormuz.
Stating that France wishes to expand commercial and economic cooperation with the Damascus administration, Barrot expressed that they aim to establish a secure transit route for Gulf producing nations through this cooperation.
According to Barrot, implementing this plan requires a comprehensive assessment of existing infrastructure and the provision of necessary security guarantees. The French minister noted that these efforts are of critical importance for securing global energy markets.
Barrot’s remarks followed French President Emmanuel Macron’s visit to Damascus on Tuesday. During the visit, Macron met with Ahmed Shara, the former al-Qaeda leader who has declared himself President of Syria.
Patrick Pouyanné, the Chief Executive Officer (CEO) of TotalEnergies, was among the delegation accompanying Macron. Characterizing Syria as a country situated “at the crossroads of the Middle East,” Pouyanné said it could establish a vital energy link between Iraq and the Mediterranean.
In response to the potential closure of the Strait of Hormuz, Iraq has been shipping its oil via tankers through Syria for export since April.
More than 600,000 tons of fuel were exported through this route between April and June. Last month, Iraqi and Syrian officials discussed the reactivation of the Kirkuk-Baniyas oil pipeline and the establishment of energy transit mechanisms.
TotalEnergies has also signed a memorandum of understanding for an offshore exploration block in the Mediterranean. However, Pouyanné stated that beyond this, the company currently has no concrete projects under development.
Stating that security conditions in the country have not yet stabilized, Pouyanné said, “It is clear today that the security situation does not yet permit us to operate here. However, I believe coming here, to Damascus, is a positive initiative.”
Shortly after Pouyanné’s statements, two bombs reportedly exploded near the Four Seasons Hotel, where the French delegation was staying.
Stating that the Syrian administration must be given time to establish control over the country, Pouyanné said, “We must not demand too much,” adding, “We need to be a little patient.”
Middle East
Senior US military officers ignored system alerts on obsolete targets, leading to strike on Iranian school
Senior US military commanders approved strike lists despite automated system warnings indicating that intelligence on certain targets in Iran was years out of date and required revalidation, according to a CNN report citing three sources familiar with the decision-making process.
The warnings were bypassed to “speed things up” under intense pressure to rapidly designate targets during the opening days of the conflict. One of the targets approved by commanders under these conditions resulted in a strike on a school in Minab.
This military decision is directly linked to the February 28 strike on the Shajara Tayyiba School in Minab, which killed at least 168 children and 14 teachers. The heavy loss of life makes the strike one of the mass casualty events involving the highest number of civilian deaths in the recent history of the US military.
According to the sources, automated system warning messages indicating that the intelligence was obsolete were already integrated into the database used during the target development process. Within this system, a target could only be added to a strike list with the approval of a senior officer. Two sources stated that the decision by senior commanders to ignore these warnings directly contributed to the school being targeted “by mistake.”
Military officials reportedly realized within days of the strike on the school that the error stemmed from outdated information. Despite the passage of months, the Pentagon has not released its investigation report on the incident.
A White House official stated that the investigation remains ongoing, asserting, “As we have said before, the US does not target civilians.”
The Pentagon referred inquiries on the matter to US Central Command (CENTCOM), which declined to comment, citing the active investigation.
School and military facility were located within the same compound
The strike reportedly occurred while the US military was targeting an Islamic Revolutionary Guard Corps (IRGC) facility located near the Shajara Tayyiba School. Initial military investigative findings also pointed to this conclusion.
Satellite imagery reveals negligence in the target analysis process. Imagery from 2013 shows the school and the IRGC base located within the same compound, whereas imagery from 2016 clearly indicates that the school had been separated from the base by a fence and provided with a separate entrance.
In satellite imagery dated December 2025, dozens of children can be seen playing in the schoolyard.
The strike took place on the first day of operations following Donald Trump’s decision to launch military action, a period during which military officials and intelligence analysts worked under intense pressure to update thousands of targets.
Analysts were unable to update all records in the Pentagon database prior to the operation. As a result, records for multiple targets—including the IRGC facility adjacent to the elementary school—consisted of information that was more than 10 years old.
Due to the accelerated timeline, analysts prioritized updating “high-priority” records, which included moving targets with a high probability of being struck first and locations posing an immediate threat to US forces. Because fixed facilities were deemed a lower priority, the information for the facility near the school was not updated.
Disconnected databases and staffing shortages compounded the error
At the center of the investigation are two separate targeting databases used by the Pentagon. These are known as the Modernized Integrated Database (MIDB), which was built in the 1980s and relies on manual data entry, and the Mitigation and Analysis Reporting System (MARS), a new artificial intelligence-backed digital platform.
Both systems indicated that information needed to be updated before use. However, efforts to fully transition to the MARS system were reportedly years behind schedule, leaving official targeting data still dependent on the legacy MIDB system.
An intelligence analyst had previously noted changes on the ground in a separate digital tool, but because this tool was not connected to the official targeting database, the information did not reach commanders. How this disconnect influenced the targeting of the school is also being examined as part of the investigation.
Following the strike, Donald Trump suggested that Iran might be responsible for the incident, later asserting that responsibility might never be determined. Defense Secretary Pete Hegseth stated that the strike would be thoroughly investigated, claiming that the US takes every possible measure to prevent civilian casualties.
However, due to cuts implemented early in Hegseth’s tenure, Civilian Harm Mitigation and Response (CHMR) teams within CENTCOM were reportedly facing severe staffing shortages.
Under the cuts made by Hegseth prior to the conflict with Iran, the 10-person civilian casualty specialist staff at CENTCOM was reduced to a single full-time employee.
Sources added that while the remaining staff did everything they could, they lacked adequate resources due to the budget and personnel cuts implemented by Hegseth.
Middle East
US revokes Iran oil license and launches airstrikes following Strait of Hormuz tanker attacks
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has revoked a general license that permitted commercial transactions involving Iranian oil.
According to a statement issued by the agency, the “General License X” regulation, which had been in effect since June 21, 2026, was fully rescinded as of July 7, 2026, and replaced by the newly introduced “General License X1” regulation.
The statement noted that a wind-down period lasting until July 17 has been granted to allow for the completion of transactions initiated prior to the revocation.
The Iranian Ministry of Foreign Affairs reacted strongly to the OFAC decision, declaring that Tehran will take all necessary measures to protect its national security and interests.
In a statement shared on the ministry’s official Telegram channel, Iran stated: “The Ministry of Foreign Affairs of Iran decisively condemns the US Department of the Treasury’s decision to revoke the temporary suspension of sanctions on the sale of Iranian oil. This step is a flagrant violation of Article 10 of the memorandum of understanding concerning the cessation of military conflict.”
Following the decision, the US Armed Forces conducted a series of airstrikes targeting Iranian territory during the night of July 8. US officials maintained that the military operation was a response to Tehran’s actions in the region. Washington characterized Iran’s conduct as a violation of the ceasefire regime and a threat to the security of navigation in the region.
The Iranian state broadcaster, IRIB, reported that explosions occurred at various locations across the country. News sources noted that seven explosions were heard near the village of Taherui in the Sirik district, and six explosions were heard near the city of Qeshm.
Previously, US media outlets including The Wall Street Journal and Axios, citing US officials, had reported that despite the active ceasefire, forces of the Islamic Revolutionary Guard Corps had attacked oil tankers near the Strait of Hormuz.
According to data shared by the United Kingdom Maritime Trade Operations (UKMTO), a tanker off the coast of Oman was struck by an unidentified munition, causing a fire on board. It was reported that the incident resulted in no casualties, injuries, or environmental pollution.
The Wall Street Journal reported that one of the targeted vessels may have been the “Al Rekayyat,” a tanker owned by the Qatar-based shipping company Nakilat.
The vessel sustained damage to its engine room, though the crew was reported to be safe. Axios reported that while the attacked vessels sustained damage, no major destruction had occurred.
On June 18, 2026, the US and Iran had signed a memorandum of understanding that established a two-month ceasefire and envisioned the initiation of negotiations for a more comprehensive agreement.
Following the start of the ceasefire period, the US had also struck targets in Iran on June 27 and June 28, citing Iranian actions against commercial vessels in the Strait of Hormuz.
Following those strikes, the Islamic Revolutionary Guard Corps had announced that operations would be launched against US facilities located in Arab countries.
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