Has US war on Iran killed the 'Gulf moment'?

Central to this transformation, he argued, was the deep integration of Gulf states within the global economy. “The Gulf’s moment is unprecedented in Arab history,” he wrote, noting that it “coincided with the coming of a new defining moment in world history, namely globalisation”. Abdulla correctly pointed out that the integration of Gulf states within the global economy has been central to their success, as their development is deeply tied to international flows of energy, commodities, capital and labour. But as a result of this reliance on global commerce, the US-Israeli war on Iran that started in February has been a major shock to Gulf economies. In retaliation against the brutal air offensive by Israel and the US, Iran has pursued a strategy of attacks on energy infrastructure and logistical facilities in Gulf Cooperation Council (GCC) countries. By attacking Gulf countries, Iran is attempting to raise the costs of this war for the global economy. The globalisation that created the power and wealth behind the “Gulf moment” has swiftly become a vulnerability. Iran’s most powerful weapon has been its partial closure of the Strait of Hormuz. This is the Gulf’s main sea artery, through which 20 percent of the world’s oil is transported to market. Resilience and adaptation Another Iranian tactic has been to attack GCC industrial complexes, with Gulf oil producers losing an estimated 15bn in energy revenues in the first two weeks of the war alone. Because of these losses there have been claims that the Gulf states will struggle to recuperate from this economic warfare, with some observers suggesting that cities such as Dubai could face ruin. However such speculation is likely to be overblown. The Gulf states have proven themselves to be relatively resilient in the face of this worst-case scenario. One example of their capacity in crisis has been the management of food imports, the majority of which transit the Strait of Hormuz. Yet so far, there are few reports of food shortages. The flexibility of the region’s logistical sector and internal trade infrastructure enables quick adaptation. Food and other commodities are now unloaded at alternative ports in Oman or Saudi Arabia, and transported by road across the GCC. Regardless of one man's mood swings, the war has underscored the region's centrality to US power and global capitalism Amid reports that multinational companies are pulling their staff out of Dubai and other cities, there has also been speculation that the status of the region as a global destination is under threat. Yet while it may take some time for confidence to be restored, the reality is that there are few alternatives to what Dubai and other Gulf cities offer. The regulatory environment and stability that attracted multinational companies and investors will remain intact after the war. In the long-term, however, this war raises key questions about the economic position of the GCC countries. It has shattered the stability and calm upon which these economies rely. Their dependence on international flows of energy, commodities, capital and labour has proven fragile and easy to rupture. The crisis shows that the “Gulf moment” was reliant on stable geopolitics. It is a reminder that the fiscal capacity of these states is not a substitute for harder forms of power, such as military force. The crisis thus shows the extent to which Gulf states are dependent on US hegemony. For decades, Washington has acted as a security guarantor, while the US and its western allies provided military bases to reinforce this structure. The military capacities of the GCC states remain dependent on the technology and expertise of the US and other western arms manufacturers. The future of petrodollars The recent erratic statements of US President Donald Trump - suggesting that he is willing to leave Hormuz closed, and insulting the crown prince of Saudi Arabia - might cast doubt on the US commitment to the Gulf. But regardless of one man’s mood swings, the war has underscored the region’s centrality to US power and global capitalism. The Gulf’s oil and gas industry is at the core of the global industrial supply chain. The closure of Hormuz is causing inflation to skyrocket; if disruption continues, it could result in the suspension of manufacturing in key global industries. It is thus unlikely that the interests of the US or other major powers in the region will wane. Iran war is a test the Gulf cannot afford to fail Read More » The Gulf’s role in the maintenance of US power is also manifest in the petrodollar system. The GCC plays a central role in maintaining the US dollar as the global reserve currency, due to the pricing of oil sales in US dollars, the result of a 1974 agreement between Washington and Riyadh. All countries must therefore hold the dollar to buy oil, gas and other commodities, leading to the accumulation of surpluses in dollars. Substantial Gulf investments also support the American economy, with GCC states estimated to own US assets worth around 2 trillion, and they are some of the biggest buyers of US arms. In 2025, the US signed an arms deal with Saudi Arabia worth 142bn. Yet there are questions about the sustainability of this system. Most Gulf oil is now sold to China and other Asian markets, leading to speculation that these transactions could take place in Chinese yuan, amid reports that Iran is allowing safe passage through Hormuz for oil shipments traded in yuan. Deutsche Bank recently issued a report exploring how this war could bring the petrodollar system to an end. For the time being, such a scenario seems remote. While the current crisis has undoubtedly compromised the claim that the US guarantees Gulf security, it has also deepened the insecurity of the GCC states, thus strengthening the case for why such a guarantee is necessary in the first place. Increasingly, it seems possible that the war will result in an emboldened and more assertive Iran - one that may demand that trade through Hormuz happens at its discretion. This would leave Gulf states with no other choice but to continue, and possibly deepen, their relationship with the US. In doing so, they may be able to ensure that the “Gulf moment” continues for a little longer. The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Eye. War on Iran Opinion Post Date Override 0 Update Date Mon, 05/04/2020 - 21:29 Update Date Override 0