U.S.-iran crisis puts Gulf states in limbo

DUBAI, United Arab Emirates (AFP) — After weathering unprecedented attacks from Iran, the wealthy Gulf states are now stuck between war and peace as talks stall and the vital Strait of Hormuz remains all but closed — threatening economic recovery.

Iran has hit Gulf energy exports with its Strait of Hormuz blockade, while its attacks have caused damage to energy infrastructure that could take months or more to repair.

Even as a shaky ceasefire holds, the threat of renewed strikes looms over the region’s economy beyond oil, threatening diversification ambitions in the Gulf, long touted as a safe haven for visitors and business.

It is unclear whether stalled talks, so far centered around the Strait of Hormuz and uranium enrichment, will produce a deal addressing the Gulf’s main concerns: stripping Iran of its control over the key waterway and keeping its missiles and proxies in check.

The longer the Gulf’s fate remains uncertain, the longer economic recovery will take, and analysts warn that the traditional US allies will struggle to influence Washington’s decisions when it comes to war and peace.

Unpaid leave

“If this goes on for quite a long time with the Strait of Hormuz blocked, some of those states are going to suffer huge blows. And they already have,” said Dania Thafer, director of the Gulf International Forum research institute.

Qatar has already stopped liquefied natural gas production and, along with energy producers in Kuwait and Bahrain, declared force majeure.

In Dubai, unusually light traffic and deserted tourist areas tell the tale of a city still waiting for a return to normality.

Weeks into a fragile truce, the initial shock has subsided, with children returning to school in the United Arab Emirates (UAE) and Qatar after more than a month of distance learning.

But some are still following classes online after many families fled. UAE schools have put drills in place for security incidents.

One luxury hotel employee said some staff have put on unpaid leave, while an employee at a beauty salon said salaries had also been slashed.

Half of the Gulf countries are expecting a contraction this year, while slowed growth is projected for Saudi Arabia and the UAE, according to the International Monetary Fund.

Big, oil-rich countries with deep pockets can boost their economies again, but these prospects hinge on how long the crisis lasts and whether a final resolution can provide assurances for the future, Jihad Azour of the International Monetary Fund told Agence France-Presse.

Meanwhile, Iran’s defense ministry on Saturday said the United States was seeking a “face-saving” way to exit the war, as US envoys traveled to Pakistan for peace negotiations.

“Our military power today is a dominant force, and the enemy is looking for a face-saving way to escape the war quagmire it has become trapped in,” media outlet ISNA quoted a ministry spokesperson as saying.

It comes as US emissaries Steve Witkoff and Jared Kushner make their way to Islamabad, though Iranian state media has said direct negotiations are not on the cards.