Oil Exports at Risk as Gulf States Diverge on Iran Conflict Strategy

A 13-night stretch of U.S. strikes on Iran and Iranian retaliation has exposed the economic fault lines running through the Gulf Cooperation Council, where billions of dollars in oil and gas export revenues, critical infrastructure and competing pipeline investments are pulling six member states in sharply different directions.

The Strait of Hormuz sits at the center of the crisis. Roughly a fifth of the world’s oil passes through it, and the central shared objective among Gulf states is keeping it open. But according to an extensive report by Politico, the pathways to that goal diverge sharply based on which countries can afford to bypass the strait, which face the greatest economic exposure to Iranian action, and whose infrastructure sits closest to Iranian territory.

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Saudi Arabia, the United Arab Emirates and Oman possess the capacity to route at least some of their oil and gas exports around the strait. Qatar, Kuwait and Bahrain do not. That fundamental difference in vulnerability has shaped each country’s tolerance for risk and its preferred negotiating stance. Countries with alternative export routes can afford a harder line; those wholly dependent on the strait prioritize its reopening above all other objectives.

The UAE’s April withdrawal from OPEC sharpened these divisions further. The move angered other member states, particularly Saudi Arabia, and signaled that Abu Dhabi is increasingly willing to act on its own economic interests rather than defer to bloc consensus. A diplomat from a non-Gulf Arab country told Politico that “the Gulf will no longer be the same as it was before” and that “the GCC is nonfunctional.”

The regional competition runs deeper than the current crisis. Late last year, Saudi Arabia bombed Yemen after an arms shipment from the UAE arrived there. Riyadh and Abu Dhabi back opposing sides in Sudan’s civil war. Only in recent years did they end their boycott of Qatar. The war with Iran has made these existing tensions more visible and economically consequential.

The divergence in approach became starkest in how individual countries responded to U.S. and Israeli strikes on Iran in late February. Michael Ratney, a former U.S. ambassador to Saudi Arabia, described the spectrum to Politico: “The Omanis were the most accommodating of Iran. The Qataris somewhat less so but still engaging and mediating. The UAE was the most prepared to get involved in a muscular way. Saudi was in the middle.”

Oman initially appeared to be negotiating with Iran over a system of transit fees in the Strait of Hormuz, an arrangement that would have had direct implications for shipping costs and energy trade flows. President Trump halted that effort in May. “Oman will behave just like everybody else, or we’ll have to blow them up,” he told reporters. The UAE and Saudi Arabia, by contrast, reportedly carried out airstrikes or drone attacks against Iran, and the UAE deepened its defense ties with Israel.

Meanwhile, distrust among neighbors has grown as the conflict persists. Each government worries that others may be paying Iran to avoid attack, potentially redirecting Iranian retaliation toward them. Reuters reported last month that the UAE was planning to transfer billions of dollars to Iran. Abu Dhabi denied the report. Qatar has promoted a ceasefire initiative. Kuwait and Bahrain reportedly attacked Iranian targets, though Kuwait denied the claim.

Gulf states are now developing infrastructure to hedge against a future in which the strait remains closed or unreliable. The UAE is building a new pipeline to the port of Fujairah on the Indian Ocean. Kuwait’s state oil company is in discussions about moving oil through Saudi or Emirati pipelines. These projects represent significant capital commitments, but they remain vulnerable to Iranian attack as long as the conflict continues. A Houthi attack on Saudi tankers has already raised doubts about the effectiveness of the land pipeline Riyadh uses to bypass Hormuz.

A memorandum of understanding signed by the United States and Iran on June 15 briefly appeared to unite the region’s governments around a simple goal: getting oil and gas moving again. That unity has not held.

Allison Minor, who served as director for Yemen and Oman at the National Security Council during Trump’s first term, suggested that Gulf coordination on the war itself may be out of reach. “I don’t think they could bring the war to a close, but they could be more productive in managing the consequences of the war,” she said. Minor proposed that Gulf countries could coordinate with European governments to monitor the strait and work with China to quietly encourage Iran to reopen shipping lanes.

All Gulf governments are also demanding a seat at the table in U.S. decision-making, a demand with direct implications for any eventual deal structure. After the GCC hosted U.S. Secretary of State Marco Rubio at a council meeting in Bahrain in June, GCC Secretary-General Jasem Mohamed Albudaiwi said that any future agreement must incorporate the bloc’s concerns. “Any future understandings or arrangements must incorporate the requirements of the GCC countries in order to safeguard their interests,” he said. The statement was not included in the State Department’s official summary of the meeting.

Nate Swanson, who conducted negotiations with Iran on behalf of both the Biden and Trump administrations, put the investment case for GCC solidarity plainly: “There’s no unity in the GCC. The best you could hope for is coordination.”

Whether even that limited coordination can hold will determine how quickly capital flows, energy revenues and infrastructure investment across the Gulf return to anything resembling stability.