24 June 2026 5:33 am

Vision 2030 and the Iran War: A Stalemate Overview

Vision 2030 and the Iran War: A Stalemate Overview

May 29, 2026

Majestic Saudi Arabian flag illuminated against the night sky, surrounded by cityscape lights in Riyadh. by Jepoy Fabian via Pexels

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Vision 2030 and the Iran War: Saudi Arabia’s Resilience Under Strain

Featured image credit: Saudi Boy via Shutterstock

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Kristian Coates Ulrichsen
Arab Center Washington DC

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Three months after the United States and Israel attacked Iran on February 28, 2026, the conflict is at stalemate: The ceasefire that began on April 8, 2026, has neither yielded a political settlement nor an agreement to reopen the Strait of Hormuz to shipping. This state of limbo has disrupted global supply chains and caused other economic strain across the world. For Gulf states that rely heavily on the Strait for exports and imports, the war has exposed severe economic vulnerabilities. Iranian ballistic missiles and cheap, abundant drones have damaged critical infrastructure, hurting investor sentiment and raising insurance costs for shipping. The war’s economic and energy impact has been greatest in Kuwait and Qatar, which currently lack viable alternatives to the Strait of Hormuz for the export of oil and liquefied natural gas, respectively.

Compared to its neighbors in the Gulf, Saudi Arabia is in a relatively advantageous position. The kingdom’s sheer size means that most tourism, cultural, and sporting events can continue despite the war. On April 25, 2026, for example, at a time when many events in other Gulf countries had been canceled, nearly 60,000 fans packed the King Abdullah Sports City stadium in Jeddah for the final of the Asian Champions Football League. Saudi Arabia’s access to the Red Sea and its existing energy transport infrastructure have given the kingdom greater resilience during prolonged disruption. More mundanely, the alternative export and logistical routes offered by Saudi geography make the war less likely to challenge the underlying principles of Riyadh’s economic diversification model. This is especially because prior to the war, the kingdom had already begun to pivot away from the massively expensive real estate ‘giga-projects’ associated with Vision 2030 and toward sectors like artificial intelligence (AI) and renewable energy. The external shock of the Iran war might also serve to boost investment in domestic industry and supply chain resilience, in which case the conflict will have helped speed up policy shifts that were already underway. For Riyadh, the war brings less a new economic direction than confirmation that its earlier decision to adopt fiscal realism was correct.

The Saudi Advantage

The existence of ports and energy facilities on Saudi Arabia’s west (Red Sea) coast and of cross-country infrastructure such as the East-West pipeline and road and rail freight corridors have given the kingdom options to bypass the Strait of Hormuz for significant (although not all) flows of oil and volumes of goods. These are not failsafe alternatives: the capacity of the East-West pipeline cannot fully compensate for the loss of oil shipped by tankers via Hormuz, for example, so exports have fallen by about two million barrels per day (b/d) from prewar levels. A significant portion of refined products and petrochemicals at facilities on the east (Gulf) coast remain shut in by the closure of Hormuz, while oil facilities at the Red Sea terminus of the pipeline are within range of missiles and drones.

The East-West pipeline has enabled the kingdom to maintain a higher proportion of its prewar oil exports than any Gulf state except Oman.

The East-West pipeline has enabled the Saudi authorities to maintain a higher proportion of its prewar oil exports than any Gulf state except Oman, whose ports lie beyond Hormuz with direct access to the ocean. Opened during the Iran-Iraq War in the 1980s, the pipeline has rarely been used to capacity but has proved its value in the present conflict. Its ability to carry seven million barrels of oil per day from the fields in the east (five million of which are destined for export, the remainder for domestic use) far exceeds the capacity of other pipelines in the GCC region. Nevertheless, exports from west coast ports, including oil from Yanbu, remain vulnerable should Yemen’s Houthis resume attacks on Red Sea shipping, in which case the Bab al-Mandab would become a second chokepoint effectively closed for trade. Ironically, the return of oil tankers and maritime services to Saudi Arabia’s Red Sea ports after the Iran war began indicated how the kingdom’s prior concerns about risk, which had soared during the Houthis’ November 2023-September 2025 Gaza war campaign against shipping, were quickly re-evaluated once Iran blocked Hormuz.

With the kingdom’s oil exports remaining at between 60-70 percent of prewar levels, and its economy benefiting from the cushion of oil revenues from prices that soared after the conflict began, it is the secondary and knock-on effects of the Iran war that are more applicable to Saudi Arabia. Saudi Aramco reported a 25 percent increase in first-quarter profit (benefiting from higher export levels in January and February 2026 and then the elevated price levels in March), but an unexpected surge in government spending due to the war meant the budget deficit rose sharply and recorded its highest-ever quarterly deficit. Loss of output from refineries and petrochemical plants, as well as from the fertilizer and aluminum sectors, have hit economic growth. Meanwhile, the drop in oil production will affect natural gas output, which is used in domestic electricity generation. In each case, the impact of the disruption will grow the longer that the standoff with Iran continues and the longer that industrial cities and ports in the Gulf, such as Ras Tanura and Ras al-Khair, are affected, and will be reflected in second quarter results when they come in over the summer.

Impact of the War on Saudi Economic Strategy

More broadly, the Iran war has brought into focus key political economy challenges facing Saudi Arabia as the leadership marked the 10-year anniversary of the launch of Vision 2030 in April 2016 and is reassessing key objectives and policy priorities. This process predates (and is unrelated to) the Iran war and is part of a reallocation of government spending away from mega-projects, such as the futuristic city The Line, the ski resort Trojena in Neom, and the Mukaab skyscraper in Riyadh, which were suspended before the war began.

The suspension of these projects indicates that Crown Prince Mohammed bin Salman and those around him are more receptive to financial constraints and fiscal realities than when the projects were announced in 2021-22. The impact of the war is likely to reinforce this trend. Policy changes already underway prior to February 28, 2026, will continue the shift in focus of Saudi policymaking as Vision 2030 moves into its final phase.

Analysts and commentators paid much attention to the Public Investment Fund’s (PIF) new five-year strategy announced on April 15, 2026, for what it portended about the mood of financial realism in Riyadh amid wartime disruptions. However, the strategic reappraisal—to move away from lavish spending on the giga-projects and toward a more targeted portfolio of investments—was first telegraphed by PIF Governor Yasir al-Rumayyan in late October 2025 and had thus been underway for months before the war. To the extent that the rollout of the PIF plan was initially expected in February 2026, it may have been delayed by the war, but the focus on six main areas and three key themes is little changed from al-Rumayyan’s remarks in October 2025. While the new strategy confirmed the pre-February 28 shift in favor of AI, industrial development and mining, logistics, travel, entertainment, and tourism, the war may cause policymakers in Riyadh to focus even more selectively on infrastructure development and new logistics corridors, such as the repurposing of Neom and its port into an industrial hub far from the Strait of Hormuz and the Bab al-Mandab.

Shedding loss-making projects and tying new investments to domestic economic initiatives may better equip Saudi Arabia to navigate an uncertain postwar landscape.

With this in mind, it is clear that a process of rationalization has already taken place as to which projects will be prioritized and how scarce resources will be allocated, and the war’s disruption may bring into sharper relief which initiatives should continue. Expanding resilience to future shocks (as well as to the ongoing disruption, should it continue significantly) is consistent with the retooling of national priorities before the war, albeit with added urgency. The withdrawal of a planned $200 million funding agreement with the Metropolitan Opera House in New York City, and the likely non-renewal of a three-year deal to host the Women’s Tennis Association’s year-end championship in Riyadh, are indicative of the paring down of deals, as is the decision to pull funding from the breakaway LIV Golf tour, which captured global attention. Shedding loss-making projects and tying new investments more directly to domestic economic initiatives may better equip Saudi Arabia to navigate an uncertain postwar landscape.

Conclusion: Resilience without Resolution

Perhaps the larger conundrum for Mohammed bin Salman revolves around the challenge of converting financial leverage into political influence with a hyper-transactional White House. From almost the day that President Donald Trump returned to the Oval Office in January 2025, the Crown Prince has made pledges of Saudi investment in the US economy a central element of the Saudi-US relationship—and the figures climbed incrementally with the president’s May 2025 visit to Riyadh and Mohammed bin Salman’s November 2025 trip to Washington. It is likely a cause of genuine bafflement in Riyadh, as well as in Abu Dhabi and Doha, that a president who saw for himself the opportunities for the United States of a stable, secure, and prosperous Gulf has been so willing to put all that at risk, first in the 12-Day War in June 2025 and more recently, and at a far greater scale, in attacking Iran without any apparent planning for the aftermath. Saudi officials do not yet appear to have considered drawing back from the United States to consolidate investments domestically, but this may be a card that they will retain should the financial stresses of a long standoff with the Islamic Republic grow more acute.

While the Iran war has exposed vulnerabilities across the Gulf, Saudi Arabia has been relatively buffered from the worst of the disruption experienced in states which lack the Hormuz workarounds or the advantage of territorial depth that offers some insulation from Iranian attacks. The rethinking of Vision 2030 implementation and Saudi investment strategies predate the war but are being sharpened by the impact of the conflict in both its kinetic and stalemated phases, as the fragile ceasefire has lasted longer than the military operations but without diplomatic resolution. As officials had already signaled a change of course as the Kingdom gears up for the final push toward 2030, and then for the four years of projects to prepare for the 2034 FIFA Men’s World Cup, the impact of the war is more an acceleration of trends already underway rather than a major change of course.

The views expressed in this publication are the author’s own and do not necessarily reflect the position of Arab Center Washington DC, its staff, or its Board of Directors.

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Consistency with Emergent Markets: Key Insights

Consistency with Emergent Markets: Key Insights

May 27, 2026

Using a tablet to analyze financial charts for trading insights. Perfect for finance and technology themes. by Jakub Zerdzicki via Pexels

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The role of consistency in emerging markets

Rob Brewis, director and investment manager, Aubrey Capital Management, discusses the challenge of maintaining a consistent approach to EM equities

by Funds Europe
 27 May 2026
The role of consistency in emerging markets

Emerging markets (EM) are often characterised as volatile and unpredictable, and to some extent that is fair. There are periods when performance is stellar and others when it is less so.

Over time, however, a consistent approach focused on quality growth companies has tended to deliver attractive outcomes.

The question of whether such an approach works in EM is a reasonable one.

Looking back over the past decade or so, the answer appears to be yes. Returns have been positive relative to the broader MSCI Emerging Markets Index, although not without interruption. Periods such as 2016, 2022 and parts of 2025 remind us that even the most consistent strategies can fall out of favour, often driven by shifts in market leadership rather than any fundamental deterioration in the underlying businesses.

Defining “quality” is less straightforward than it might first appear. Every investor would claim to be looking for good companies. The difficulty lies in being explicit about what that means in practice. One way of framing it is through a simple set of metrics: returns, cash generation and growth. A return on equity of around 15% is a useful starting point. In emerging markets, estimating a precise cost of capital is challenging, so a consistent threshold provides a degree of discipline. It is also a relatively demanding hurdle. From a universe of several thousand companies, only a small proportion consistently achieve that level of return.

Cash generation is equally important. Growth has to be funded, and the distinction between internally generated cash and external financing matters a great deal over time. Companies that rely heavily on borrowing or repeated equity issuance often end up diluting shareholders, whereas those that can reinvest their own cash flows tend to compound more effectively. Earnings growth, in turn, provides the third leg of the framework. In a part of the world where structural growth is higher, mid-teens earnings growth is not unreasonable and allows for a meaningful compounding of value.

These measures are deliberately simple, but they help to narrow the field considerably and focus attention on a relatively small subset of businesses.

There is, however, such a thing as too much of a good thing. Very high returns, while attractive, are rarely sustainable. They tend to attract competition, and over time that competition erodes excess profitability. Varun Beverages provides a good example. The business has been highly successful, particularly following its expansion into southern India and the improvement of previously underperforming assets. Returns rose sharply as a result, but that success inevitably drew attention. New entrants, including Reliance Industries, have since made the market more competitive. It is an excellent business, but the environment has become more challenging, and returns have begun to normalise.

A slightly different example can be found in Eicher Motors, owner of the Royal Enfield brand. Here the strength lies in the brand itself. It is a dominant player in its segment, with a product that is both aspirational and distinctive. Returns have been consistently robust over time, although not immune to cyclical pressures. Regulatory changes and pricing dynamics have at times affected demand, but the underlying franchise has proved resilient.

The importance of cash generation becomes particularly clear when considering the risks of dilution. In parts of the emerging market universe, this has been a persistent issue. China offers a useful illustration.

While economic growth and aggregate corporate earnings have been strong over the past two decades, earnings per share have grown much more slowly. The gap reflects the impact of new listings, capital raising and, in some cases, state-driven dilution. For minority shareholders, this can significantly reduce the benefit of headline growth.

This is not to say that high-quality businesses do not exist in China. On the contrary, there are a number of globally competitive, entrepreneur-led companies. CATL is one such example. Its position in the electric vehicle battery market, combined with strong cash generation, allows it to invest heavily while maintaining a leading competitive position. The balance between reinvestment and return is a powerful one.

Perhaps the clearest example of this dynamic is TSMC. Over a long period, it has combined steady growth with high levels of cash generation and consistently strong returns. It operates in a cyclical industry, but the degree of cyclicality is lower than might be expected, reflecting its dominant position and disciplined approach. Rather than maximising short-term profitability, it has tended to focus on long-term relationships and capacity investment, which in turn has reinforced its competitive advantage.

Even so, there are periods when this type of steady compounding falls out of favour. Over the past year, for example, companies with these characteristics have underperformed the broader market. Some of this can be attributed to regional factors, including a difficult period for India and a more prolonged slowdown in China. Valuation also played a role, particularly where expectations had become elevated.

Such periods are not unusual and tend to be cyclical. What is perhaps more relevant is that, in many cases, valuations have adjusted while underlying fundamentals remain intact. Returns are still strong, cash generation remains robust and balance sheets are generally healthy, often with net cash positions rather than leverage.

The composition of emerging markets themselves has also evolved. Markets such as Korea and Taiwan now exhibit many of the characteristics of developed economies, while China and India remain central to the broader growth story. Beyond these, there is a diverse range of smaller markets, each with its own dynamics and opportunities.

After a prolonged period in which emerging markets were relatively unloved, there are signs that sentiment may be shifting.

Performance has improved more recently, although volatility remains a feature of the asset class. For investors, the key question is less about short-term movements and more about the ability of businesses to compound over time.

In that context, a focus on companies that generate consistent returns, produce cash and grow earnings steadily continues to provide a useful framework. It does not eliminate volatility, but it does offer a way of navigating it, and over time, that has tended to be rewarded.

One day (maybe soon) the Koreans will work out how to “graduate” to DM and that will change the complexion considerably, although Taiwan (also a highly developed country) should graduate but I suspect there are political ramifications to hold this back. Either of these would be a big change to the asset class and if both were to go, it becomes a China and India story again.

Of course, there are natural changes, which can be dramatic, such as the one we are seeing today, when a small handful of stocks, this time technology stocks, become very dominant at the expense of all the others. This tends to happen to the more cyclical stocks, and this can come and go. I remember Samsung being a dominant stock in the past, but not for 20 years or so!

Read the original text in Funds Europe

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What to Play Next: Rethinking Development Today

What to Play Next: Rethinking Development Today

May 19, 2026

View of an unfinished high-rise building under construction against a clear blue sky, showcasing urban development. by The Capturist via Pexels

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What to Play Next: Development after the End of Development

By Heiner Janus and Michael Roll – 
Development, inequality and poverty
What to Play Next: Development after the End of Development

Heiner Janus and Michael Roll argue that the largest aid contraction on record coincides with a reopened decades-old fault line: what “development” means, who it serves — and how the field can reinvent itself for what comes next.

Manchester embodies reinvention like few other places. It built the world’s first industrial economy, watched it rust, and recast itself as the capital of England’s north. When protests turned deadly at the Peterloo massacre, it helped galvanise a tradition of organised labour and democratic reform — one that later produced the suffragettes, founded there by Emmeline Pankhurst. And when Joy Division collapsed, the remaining members re-emerged as New Order. That instinct — not to reassemble what broke but to build something new — was the animating spirit when the University of Manchester’s Global Development Institute convened researchers in mid-April to ask: is the era of Development over? And if so, what replaces it?

The question is sharpened by recent events. According to preliminary OECD data, official development assistance by DAC members fell by 23.1 percent from 2024 to 2025, the largest annual contraction on record, bringing aid back to where it stood when the Sustainable Development Goals (SDGs) were adopted in 2015. The SDGs themselves, once billed as a universal aspiration, have been formally denounced by Washington at the United Nations General Assembly. Yet the upheaval is not just institutional. It has reopened a fault line that has run through the concept of “development” from the start: what the term actually means and who it refers to.

Two distinctions matter. The first is between big-D Development, the organised international project of aid agencies, multilateral institutions, and global goal-setting, and small-d development, the messy, nationally driven process of economic and social transformation that has always owed more to domestic politics than to foreign assistance. The dismantling of the former does not necessarily halt the latter. The second distinction concerns geography. Is development a universal process, occurring in Manchester, Mumbai and Mombasa alike, or does it describe a specific relationship between richer and poorer parts of the world? The conference confronted both questions, and the answers offered little comfort.

The opening plenary dispensed with the notion that this crisis is a temporary disruption. Lee Jones of Queen Mary University argued that we are witnessing a “second Cold War” — not a systemic battle between rival ideologies, as in the first, but a positional struggle within globalised capitalism, where the pillars of the neoliberal order are being pulled apart from the inside. The implications he drew were blunt: the multilateral system is unlikely to survive in its current form, major powers are converging on a miserly approach to development spending, and what remains will be “small-d development” — capitalist integration through reworked value chains, constrained to strategically relevant geographies. National security and economic competition will trump poverty reduction and climate action.

Yuen Yuen Ang of Johns Hopkins University drew a sharper conclusion. The “polycrisis,” she argued, is paralysing only for those attached to the old order. No society has ever escaped poverty through aid or randomised controlled trials. The era of aid dependence is ending, and the spread of universal institutions has ground to a halt. For the global majority, which has never been the producer of the dominant development paradigm, this represents what she calls a “polytunity”: an opening to redefine development itself, away from assimilation and mimicry and toward what she terms an adaptive, inclusive, and moral political economy.

If Jones and Ang diagnosed a paradigm in collapse, Daniela Gabor, SOAS University of London, examined the financial architecture being built in its place. Her concept of the “Wall Street consensus” describes a world where development has been recast as an investible asset class: states de-risk while private capital extracts. The Lake Turkana wind farm in Kenya served as her case in point, a project assembled through a patchwork of dozens of financial agencies that ended up owned by BlackRock, structured in a way she called fundamentally anti-developmental. She pointed to fossil fuel subsidies rolled out in response to rising energy prices, and donor agencies bluntly subsidising domestic companies, as variations on the same theme.

The Wall Street consensus, Gabor argued, is a weak strategy of American hegemony for three reasons: it is not fast enough, not just enough, and not stable enough. Even the World Bank’s renewed interest in industrial policy amounts to little more than subsidising private capital with public money. In closing, she called for a new state-coordinated developmentalism — one that covers all states and combines industrial policy with decarbonisation.

The sharpest challenge to the current development cooperation system came from Ken Opalo of Georgetown University, who opened the second day by accusing the development community of navel-gazing. The sky has not fallen in most low-income countries, he argued, and the pathologies of aid dependency may mean its decline is less catastrophic than the sector assumes. The SDGs, in his telling, represent the lowest common denominator imaginable: any education minister merely parroting SDGs is not thinking about context, and without context, policy outruns the capacity to implement it. His prescription was a pivot from “nano-development,” meaning small, tightly measured interventions, to national development and the proactive use of policy autonomy: context-specific knowledge production, support for local priorities rather than donor-driven faddism, and honest conversations about how European trade and environmental policies actively harm the countries they claim to help.

The closing plenary surfaced the underlying tension. “Development” is becoming a dirty word, observed one participant working in a development agency. Partners find it patronising; within five years it may no longer function as a policy category. Another colleague noted that geopolitics had dominated the conference at the expense of other forms of politics, and that the return to thinking in terms of national development risks ignoring the inequalities within states that development studies had spent decades trying to illuminate. The field is being asked to reopen debates it thought it had closed. Whether development studies can survive without big-D Development remains an open question. The field’s fragmentation and its uncertain institutional footing suggest that muddling through is not an option.

Yet there is a counterweight that has been overlooked: bureaucratic inertia itself. Research on how officials in development agencies behave suggests that career bureaucrats are driven less by ideology than by institutional incentives — blame avoidance, risk aversion, and the desire to keep programmes running. These instincts are usually treated as pathologies. They often are. But in a period of erratic political disruption, they also act as a brake. Bureaucratic routines absorb and dissipate radical policy shifts. Budget lines survive reorganisations; institutions outlast the politicians who threaten to abolish them. None of this defends the status quo. But it does mean that the window for reinvention may be wider than the rhetoric of crisis suggests. The machinery slows the demolition, buying time for those willing to design what comes next.

Manchester knows something about that. Development studies at the university began in the late 1950s as a training centre for “overseas administrators.” Over the following decades it was rebuilt, first into a research institute, then into the Global Development Institute — now one of Europe’s largest centres for the study of development. A key leader in this transformation was David Hulme, the institute’s long-serving executive director, who retires this year. The conference closed with a standing ovation in his honour — a reminder that institutions, like cities, are shaped by people willing to keep innovating. The development community now faces the same test. The raw material for reinvention exists. As any member of New Order could confirm, the hardest part is not letting go. It is deciding what to play next.

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Heiner Janus is a Project Lead and Senior Researcher at the German Institute of Development and Sustainability (IDOS), where he leads a research project on the effectiveness of development policy.

Michael Roll is a Project Lead and Senior Researcher at IDOS, where he works on the governance of urban sustainability transformations in the Transformative Urban Coalitions (TUC) project.

Photo by Austin Garcia from Pexels

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Building Resilience in Europe and Central Asia Today

Building Resilience in Europe and Central Asia Today

May 16, 2026

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Building Resilience in Europe and Central Asia: A Smart Investment for Growth and Jobs

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Building Resilience in Europe and Central Asia Today Building Resilience in Europe and Central Asia: A Smart Investment for Growth and Jobs Apartment buildings in Kazakhstan. Photo: IK PhotoStudio

The data is clear: Investments in adaptation and resilience deliver high economic returns but remain insufficient and poorly targeted. Evidence shows that targeted, early investments in resilient infrastructure, climate-smart agriculture, and early warning systems can deliver strong economic and social returns and reduce losses, even under uncertain futures.

However, adaptation finance in Europe and Central Asia is the lowest among all regions as a share of GDP, despite being the world’s fastest-warming continent. In 2025, floods, droughts, and heatwaves cut an estimated US$50 billion from that year’s EU output. By 2029, the longer-term effects are projected to reach US$147 billion, with some countries facing losses approaching 3% of their gross value added.

How countries prepare makes a decisive difference. In Poland, years of investment in flood defenses and early warning systems shielded millions from the worst impacts when, in 2024, Storm Boris killed dozens and caused billions in damages across Central and Eastern Europe. This reflects a broader pattern: countries that invest in resilience before shocks fare better.

A new World Bank report, Building Resilience and Climate Adaptation in Europe and Central Asia, takes stock of where the region stands, what the business case for adaptation is, and what it would take to close the adaptation gap. The findings, compiling evidence from the World Bank Group’s Country Climate and Development Reports, are instructive.

The potential impact of smart investments is considerable. Across the region, World Bank modeling suggests that adaptation and resilience investments equivalent to approximately 1.7% of GDP through 2030 would offset, on average, more than one-third of projected climate-induced economic losses. At the project level, the public investment case for adaptation is also compelling, with most adaptation investments yielding benefits outweighing costs by a factor of 2-10, and some substantially higher. The cost of inaction is also significant. Without adequate adaptation, the short-term losses outlined above propagate into the long-term, leading to annual losses across ECA reaching nearly 6% of GDP by 2050. The transport sector, for example, already sustains damage from hotter temperatures and increasing instances of extreme weather at roughly three times the rate of other regions. For firms, a single-unit rise in temperature variability (that is, larger swings around normal seasonal patterns) is associated with a 9% drop in sales on average.

Across the region, extreme weather events are a direct threat to the jobs and livelihoods that underpin household welfare and economic stability. More than one in three people across ECA live in areas of high exposure to such risks, and substantially more in Bosnia and Herzegovina, Croatia, Moldova, and Romania. Poverty is the single largest driver, accounting for roughly 40% of households’ exposure across the region, rising 70%-90% in some countries. In Moldova, where agriculture supports more than 30% of all jobs, a single drought in 2020 pushed rural poverty up by more than 8 percentage points. In Tajikistan, continued inaction could push an additional 100,000 people into poverty by 2030.

Despite this evidence, Europe and Central Asia significantly under invests in adaptation. The best available data suggests that ECA received just US$3 billion in adaptation finance in 2023. This is the lowest share relative to its economy of any region, and well below the estimated annual needs, which could reach US$20 billion. Private finance, although probably underreported, accounts for barely 2% of that total.

While adaptation is often seen as a government responsibility, resilience is fundamentally built through private decisions by households and firms. But these need to be enabled by the right public information, incentives, and finance.

To close the adaptation gap and accelerate progress, the report identifies five areas where policy can make the biggest difference, including putting private actors in a position to adapt:

  1. Accelerate income growth and close gaps in inclusion: Economic development remains the most powerful tool for building resilience. By focusing on inclusive growth, countries can empower households and firms to invest in their own protection and diversify their economies away from climate-sensitive sectors.
  2. Improve access to information and finance: Governments, firms, and households need reliable climate data and risk information to make informed decisions. Expanding access to finance, especially for the most vulnerable, is crucial for unlocking private investment in adaptation.
  3. Strengthen safety nets and insurance: Adaptive social protection systems and well-functioning insurance markets are essential to protect people and businesses from the financial fallout of increasingly extreme weather shocks, reducing the burden on public finances.
  4. Build resilient infrastructure: Upgrading legacy infrastructure to withstand future climate impacts, mainstreaming adaptation standards in new investments, and promoting sustainable land and water management will reduce exposure and enhance resilience across sectors.
  5. Establish robust macro-fiscal and financial sector policies: Governments must integrate climate risks into fiscal planning, strengthen public investment management, and create enabling environments for private sector participation in adaptation.

Addressing these priorities is not a radical departure from standard development practice – it extends what governments in the region already do. The adjustment required is to adopt a clearer view of how a changing climate alters the risk environment. Countries that make that shift stand to protect not only their populations, but also the jobs, investments, and fiscal positions on which their development depends. The World Bank Group’s work in Europe and Central Asia is increasingly helping countries make exactly that adjustment. The returns are proven and the approach is known; what’s needed now is sequenced execution.

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Gulf State Cooperation Has Long Been Shaped by Iran

Gulf State Cooperation Has Long Been Shaped by Iran

May 14, 2026

Scenic view of Musandam’s rugged mountains and serene coastline under a clear sky. by Siarhei Nester via Pexels

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Gulf state cooperation has long been shaped by the threat of Iran − but shows of unity belie division

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Leaders attend the 45th Gulf Cooperation Council Summit in Kuwait City, Kuwait on Dec.01, 2024. Amiri Diwan of Kuwait/Handout/Anadolu via Getty Images
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Firmesk Rahim, UMass Boston

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Arab Gulf countries, battered economically and physically by the war with Iran, were keen to put on a united front at a key regional meeting on April 28, 2026.

Gathering in the Saudi city Jeddah, representatives of the Gulf Cooperation Council warned the Iranian government in Tehran that an attack on any one of its six members would be taken as an attack on all. Rejecting Iran’s claims to control of the Strait of Hormuz, Qatari Emir Sheikh Tamim bin Hamad Al Thani later described the summit as embodying “the unified Gulf stance” over the conflict.

The show of togetherness may seem at odds with other recent developments that have seen members of the GCC split over policy and vision for the region – not least the United Arab Emirate’s decision to quit the oil cartel OPEC.

But to followers of Gulf politics, like myself, the scene felt familiar. Time and again, Iran has accomplished what no outside mediator could: It has pushed divided Gulf Arab states together. When tensions rise, the monarchies of the GCC – Bahrain, Qatar, UAE, Saudi Arabia, Kuwait and Oman – tend to stand united, at least publicly.

From revolution to coordination

The modern Gulf security environment was profoundly shaped by the 1979 Iranian Revolution.

Iran shares a narrow and strategically vital waterway with the Gulf states but has long differed in identity and outlook. Specifically, Iran’s Shiite revolutionary model contrasts with the Sunni-led monarchies across the region.

Before 1979, when Iran was ruled by Shah Mohammad Reza Pahlavi Iran and Saudi Arabia, the largest of the Sunni Arab Gulf states, were regarded by Washington as “twin pillars,” protecting American interests in the Middle East. Their relationship was cooperative, but not close.

Then the emergence of the Islamic Republic after the revolution in 1979 introduced a new kind of regional actor – one defined not only by state power but also by Shiite ideological ambition.

Gulf monarchies’ concern over both external security and internal stability was reinforced by the 1979 Grand Mosque seizure in Saudi Arabia, when Islamist militants seized Islam’s holiest site. The event, alongside Iran’s revolution, exposed the vulnerability of Gulf regimes to religiously driven upheaval.

A large plume of smoke is seen amongst buildings
The 1979 siege at Mecca’s Grand Mosque raised concern over security across the Gulf region. AFP via Getty Images

In response to this revolution ideology, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE established the GCC in 1981. Although officially framed as a platform for economic and political cooperation, the organization also reflected shared security concerns and Arab identity.

But unity had limits. Member states did not all view threats to their respective regimes in the same way.

Saudi Arabia worried about U.S. pressure for reforms; Kuwait feared neighboring Iraq; Bahrain was concerned about Iran’s influence over its own Shiite population; and the UAE worried about both Iran and its own large foreign workforce. Meanwhile, Oman and Qatar followed a more independent or balanced approach.

These differences would shape the trajectory of the GCC, and Arab Gulf states’ relationship with Tehran.

The eight-year Iran–Iraq War, which began in 1980, brought to the fore fears of Iran’s influence across the region. While Oman declared neutrality, other GCC states supported Iraq by funneling billions of dollars to the regime of Saddam Hussein.

This revealed an early pattern: Gulf states could coordinate politically, but avoided acting as a single strategic bloc. The GCC broadly favored Iraq as a counterweight to Iran, but there was no unified strategy or formal policy.

Security dependence

The Iraqi invasion of Kuwait in 1990 reshaped the region’s security structure again. In early 1991, the move prompted a U.S.-led coalition, including Saudi Arabia and other Gulf states, to expel Iraqi forces. Saudi Arabia’s role was especially significant: It not only hosted coalition forces but also actively participated militarily – marking one of the first major episodes in which a GCC state was directly involved in the defense of another member.

Soldiers are seen walking in a line in the desert.
American troops at Dhahran airport in Saudi Arabia during Operation Desert Shield.
Eric Bouvet/Gamma-Rapho via Getty Images

During – and especially after – the Gulf War, GCC states deepened their reliance on the United States, agreeing to host U.S. military bases and expanding long-term defense cooperation.

This external security umbrella provided a measure of stability, but it also introduced new differences. While Saudi Arabia, Kuwait, the UAE and Bahrain aligned more closely with Washington’s strategic framework, others – notably Oman and Qatar – maintained a more flexible approach. As a result, the appearance of unity coexisted with growing variation in national strategies.

This pattern has continued in recent years, significantly through diplomatic moves to normalize ties with Israel under the Abraham Accords. While the UAE and Bahrain moved quickly to formalize ties with Israel, others remained more cautious.

The effort to contain Iran

When it comes to combating Iranian influence, GCC states have long played different roles.

Oman has consistently acted as a mediator, maintaining open channels with Tehran and facilitating quiet diplomacy — including back-channel talks between Iran and Western states.

Qatar also kept communication open, partly because of shared economic interests with Iran – particularly the management of the North Field/South Pars gas reserve.

Saudi Arabia and the UAE, by contrast, have generally taken a more cautious and at times confrontational stance toward Iran. Both view Iran as a regional competitor and a source of security concerns, particularly due to Tehran’s missile program and its support for ideologically opposed non-state actors.

This contrasting approach to Iran across the GCC allows different states to engage Tehran through multiple channels, but it also makes it harder to form a consistent, unified GCC strategy.

A changing regional balance

The 2003 Iraq War marked a turning point in the GCC-Iran dynamic. The removal of Iraq as a regional counterweight allowed Iran to expand its influence.

And this development sharpened divisions within the GCC.

Saudi Arabia and the UAE increasingly viewed Iran as a direct strategic threat requiring containment. Qatar and Oman, however, emphasized dialogue and mediation.

These differences became more visible during the Qatar diplomatic crisis of 2017. The dispute centered around Qatar’s support for Islamist political groups such as the Muslim Brotherhood, considered a terrorist organization by the UAE and Saudi Arabia.

Saudi Arabia, the UAE and Bahrain severed diplomatic ties with Qatar and imposed a full air, land and sea blockade in June 2017. The three nations accused Qatar of supporting extremist groups and maintaining close ties with Iran. Isolated, Qatar relied on Iran for airspace, trade routes and supplies, strengthening the relationship between the countries. The blockade eventually ended in January 2021, when the parties signed a declaration restoring diplomatic and trade relations at a GCC summit in Saudi Arabia.

GCC under attack

The series of events that began with the Oct. 7, 2023, attack by Iranian-backed Hamas in Israel shook up GCC relations with Tehran.

In June 2025, in response to the U.S.-Israeli attack on Iran, Tehran struck a U.S. base in Qatar – the first such attack on a GCC state by Tehran.

At an extraordinary meeting in Doha, Qatar’s capital, GCC members pledged full solidarity with Qatar and strongly condemned the Iranian attack.

But it was not enough to prevent Iran from attacking all six GCC states in response to the ongoing conflict begun in February 2026 by U.S. and Israel.

The subsequent closure of the Strait of Hormuz, affecting 20% of global oil supplies, has sparked what many see as the biggest crisis in the Gulf since the inception of the GCC.

The GCC responded by emphasizing collective security and unity. But yet again, the public show of togetherness masks divergent views on how to respond. When the war ends, each state will likely return to its own strategic and foreign policy approach.

Understanding the pattern

Since 1979, Tehran’s actions in the Gulf region have exposed two parallel developments. On the surface, there are shared concerns among GCC members and public shows of unity. But underneath this facade of unity, each state has continued to develop its own national priorities and risk tolerance.

The combination of these two factors helps explain why the GCC often appears unified during crises, while remaining internally divided over how to respond to them.

Rather than viewing the GCC as a fully cohesive bloc, it may be more accurate to see it as a framework where cooperation and disagreement coexist.The Conversation

Firmesk Rahim, PhD Student, UMass Boston

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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