By Andrew Mills
Oct 28 – The closed-door diplomacy meant to end the war is doing little to calm the Gulf, where tensions and rhetoric are sharpening. Donald Trump says the US may strike Iran again, and Iranian security officials say Tehran has plans to hit back.
We get only small glimpses of what is said in Tehran and Washington, and this week’s did not offer much clarity. Qatari mediators brought Tehran a new draft deal on Sunday. By Wednesday, a senior Iranian official had dismissed what Qatar had presented as “unacceptable ideas and not an offer.” On Monday, officials from the Mecca mutual defence pact countries — Saudi Arabia, Turkey and Pakistan — met Iran’s leaders in Tehran and agreed to keep talking, though no one has said about what. Meanwhile, Houthi attacks on Saudi Arabia continue. Does any of this make anyone feel safer?
That disconnect between talks and concrete signs of progress is the subject of this week’s analysis. Like oil traders, Gulf residents are watching for signals, but only one group can benefit from the fluctuations and read the trends off a screen. In the news briefing, a senior UAE diplomat makes a surprise UN bid, the Iran war’s price tag climbs, and Canada and the UAE sign a trade deal. Last Wave looks at what Israel’s election might mean for the Gulf.
NEWS BRIEFING
* UAE Minister of State Lana Nusseibeh, a veteran diplomat and former UN ambassador, has entered the race for UN secretary-general. Rights monitors say she lacks the moral standing for the job, citing her role in championing the country’s foreign policy and denying UAE intervention in the conflict in Sudan. Her late bid has upended a gridlocked contest.
* The US has spent more than $47 billion on the Iran war, over 25% above the Pentagon’s July estimate, according to Pentagon data obtained by Reuters. The unpopular conflict, which has lifted energy costs, is hurting Republicans before the November 3 midterms. The figure doesn’t clearly include the costs to repair damaged US bases.
* Canada and the UAE signed a trade deal to lower barriers between the two economies and boost investment. It would cut or eliminate tariffs on over 99% of Canadian exports to the Emirates. Prime Minister Mark Carney is seeking new partners amid tensions with Washington. The pact is expected to take effect in 2027.
ANALYSIS: LIKE OIL TRADERS, GULF RESIDENTS ARE LOOKING FOR SIGNALS OF STABILITY
In early September, I wrote that uncertainty in the Gulf had become “a new fundamental”: not risk, which can be priced, but a condition where nobody can define the variables. Seven weeks on, it hasn’t lifted. It has deepened.
Saudi Arabia, the world’s top crude exporter, is now a main target of Houthi attacks, and the tension between Washington and Tehran has sharpened. US President Donald Trump said on Friday the US may strike Iran again. Iranian security officials have promised to hit back if the US and Israel do, telling Reuters that Tehran has detailed plans to hit Gulf undersea cables.
Oil traders are reading the same headlines Gulf residents are. The difference is that they have a number that moves every few minutes in response. Residents have no such gauge, and official communication is thin. Perhaps we should start reading the oil ticker as a proxy for our moods. The Reuters daily oil report, one of our most-read pieces, is a new, unlikely barometer for the region’s sentiments.
Consider the past week. On Thursday, Reuters reported that the US ordered some diplomats and family members out of Saudi Arabia, and Aramco evacuated its Dhahran headquarters. By Friday, Brent had settled at $116.72, its highest since April.
On Sunday, Reuters reported that Qatari mediators went to Tehran, and then on Monday Saudi, Turkish and Pakistani officials met Iran’s leaders. Brent fell more than $2 at one point, then closed down only 91 cents as attacks continued. On Tuesday, after the four countries agreed to keep talking, Brent settled down 1.7%. Then the Houthis said they had hit Saudi Arabia’s biggest refinery. Riyadh hadn’t confirmed it, but on Wednesday Brent crude futures were up 1.2% in morning trading, near $115.
Diplomacy shaves the price and attacks restore it. Hope never fully takes hold. Residents will recognize the feeling.
Where the analogy breaks is that a trader can hedge or sell as the information changes. A family must decide about schools, travel and whether to stay put — all decisions that are harder to reverse. Gulf governments’ “business as usual” messaging does little to calm anyone. In some cases it erodes trust.
Schools are one signal families can feel. This month, they have been online in Riyadh, which has come under attack almost daily. Elsewhere they are holding on, though regional sports tournaments have been cancelled and field trips postponed. Many Gulf children began their schooling online during COVID, and they know the cost of school closures.
The oil market and Gulf residents are waiting on the same thing: the next moves from Washington and Tehran. ING commodity strategists say the risk premium might start to erode if the US midterms on November 3 pass without renewed strikes on Iran. UBS has raised its year-end Brent forecast to about $110 from $100, and the International Energy Agency’s Fatih Birol doesn’t expect 2027 markets to return to prewar levels.
Residents pay a premium too, though it never shows on a screen. Traders will keep trading whatever happens. With the war now in its ninth month, the signal we’re waiting for hasn’t come. If anything, stability looks further away.
CHART OF THE WEEK
Cancellations grounded almost nine out of every 10 scheduled flights at the Saudi capital’s airport between October 8 and October 25, according to data from aviation analytics firm Cirium.
Riyadh’s airport, the kingdom’s second-busiest after Jeddah, has been struck repeatedly, including an attack on October 10 that killed 13 people, the deadliest in the kingdom in more than a decade.
Several major airports recorded severe disruption, including Riyadh at 86%, Dammam at 42% and Abha at 46.7%, where the Houthis have claimed strikes. A number of smaller regional airports saw the vast majority of flights cancelled, including Najran, near the Yemeni border, where all flights were cancelled.
LAST WAVE: Netanyahu holds on as caretaker, signals fresh push against Iran
Benjamin Netanyahu looks set to survive Israel’s election, at least as caretaker, after winning clearer backing from Israeli Jews than polls predicted. With 77.6% of votes counted, his right-wing, far-right and ultra-Orthodox bloc is forecast to win 54 seats against 49 for Gadi Eisenkot’s opposition, though he lost his majority in the 120-seat Knesset.
For the Gulf, his victory speech pointed to renewed war with Iran. He said Israel and Trump had a “singular historical opportunity” to remove the Iranian threat. Trump had urged voters to keep Netanyahu in power to complete the Iran mission, and said his endorsement helped. Trump has also held out the possibility of restarting combat after the November 3 US midterms, and US officials say the Pentagon is planning for it. Eisenkot urged security chiefs to resist political pressure. The shekel fell about 1.6%.
(Editing by Aidan Lewis)