Will the Gulf area be entirely altered by a battle with Iran?
Reuters Gulf team members, like their neighbors, are huddled in stairwells or windowless toilets. The rumble of missiles crashing overhead is heard. Some are trying to calm frightened children, others are dealing with messages from worried relatives and friends abroad.
We are now wary of new things. Like which windows might burst, where to find staples like chicken or bananas in times of crisis, and every sound—even the sound of a neighbor closing a cupboard—can send shivers down our spines.
The region’s newly dangerous airspace has been closed. The only way to escape is through long stretches of desert, through areas that Iran is attacking. We are all faced with an impossible question: to stay or to leave, and if we want to leave, how?
“For the first time, he is worried about the future of the city,” says Federico Maccioni, a member of our Dubai finance team. But Rachana Uppal, our chief economic correspondent in Abu Dhabi, says he is surprised to see everything going on as normal there—people shopping, going to the dentist and even riding jet skis.”
Meanwhile, as journalists we are spread across the Gulf, we are trying to make sense of the situation. This week’s Gulf Currents reports that Iranian drones are carrying out a sustained campaign of attacks—breaking through the Gulf’s air defenses and hitting airports, hotels and data centers.
Tourism has been hit, business hubs have been crippled, and the Gulf states’ decades-long efforts have suddenly been thrown into deep uncertainty.
Our briefing examines the economic shock, the strategic interests and the lasting changes this war could bring.
This war is testing the foundations of the Gulf
For decades, the Gulf has been built on two core assumptions. The first is that its cities are safe havens in a volatile region. The second is that the vast wealth from uninterrupted energy exports will keep flowing.
But this week’s events have shaken both assumptions together, and perhaps permanently.
The idea that the Gulf is a safe haven has been shattered at first. Dubai, which has become a symbol of security in a violent Middle East, has been the target of Iranian missiles and drones for days, targeting airports, ports and luxury buildings.
UAE President Sheikh Mohammed bin Zayed walked through the Dubai Mall on Monday evening. He wanted to show that business in his country was going on as usual. But flights were grounded, stock markets were closed, and panicked residents were standing in long lines to buy goods. And all the while, the sky in this city of skyscrapers was shaking with the sound of war.
The trauma has cast doubt on cities like Dubai, Abu Dhabi and Riyadh. Popular for their assurances of safety, easy access and good ideas, these cities are suddenly proving vulnerable to regional unrest. The question is whether the cities can maintain the allure of their promise of a high quality of life.
Economic collapse and instability
The second collapse is economic, and so far it has been profound.
The closure of the Strait of Hormuz and the suspension of Qatar Energy’s LNG operations have created a sudden supply shortage that was previously unimaginable.
Qatar Energy supplies one-fifth of the world’s LNG and has a record of never missing deliveries.
In addition, Iraq has cut oil production due to the war; Saudi Arabia is diverting crude; hundreds of tankers are waiting near the port of Fujairah. The port is still on fire after the attack, and there is no safe way out. The prices of oil, gas and related products have soared.
The Gulf countries’ diversified economies, large investments and liberal social policies depend on energy exports. That idea has suddenly become fragile. Some of the damage may never be repaired.
The Future of Iran-Gulf Relations
But the war has once again raised a big question. What will Iran’s relations with the Arab Gulf states be like after this war?
After years of gradual attempts to return to peace, the Gulf Arab states have begun to reassess their relations with Iran based on geographic and mutual interests. That fragile trust has now completely collapsed.
The impact is profound. The Gulf region’s economic model, energy security, and regional diplomacy—long assumed to be stable—have all become unstable.
While the war may soon end, the era of strategic risk-taking with Iran is over. A more cautious and security-oriented Gulf era awaits.
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