By Mehran Haghiran and Jessica Obeid

A version of this article was originally published in French in Le Grand Continent.

The decision by Abu Dhabi to leave the Organization of Petroleum Exporting Countries (OPEC) is about more than energy policy. The move reflects a broader frustration with regional and international frameworks that no longer match how the United Arab Emirates sees its interests, both in the Gulf and beyond. The Iran war has brought that reassessment forward, not just for Abu Dhabi, but across the Gulf Cooperation Council (GCC) capitals, which largely share the same perceptions and predicaments.

The timing of the Emirati decision is central to understanding it. While the announcement comes as the war is paused, the ceasefire is uncertain and the Strait of Hormuz is effectively closed. The Gulf’s core systems are under pressure as shipping is disrupted, insurance costs have surged, energy flows are unstable, food cargo has been delayed, and aviation networks have been partially shut down. In this environment, coordination mechanisms that depend on stability have lost their meaning in the absence of meaningful action.

The region’s growing integration into global markets has created strength, but also vulnerability. Ports, airspace, desalination plants, financial systems, and supply chains are all part of the same ecosystem. Once disruption begins in one area, it spreads quickly.

Since the start of the conflict, Emirati officials have signaled a growing dissatisfaction with the institutions the country has long been part of. That includes not only OPEC, but also the GCC itself, the Arab League, and the Organization of Islamic Cooperation. The criticism has been consistent in that these platforms are not delivering, especially as the UAE has wanted to play a stronger role while its peers seek the same.

Energy Ambitions

For OPEC, the dissatisfaction runs way longer. The UAE has long been uncomfortable with constraints that do not reflect its capacity or ambitions. It has invested heavily in production and infrastructure and has pushed repeatedly for higher quotas within OPEC.

Since 2021, the UAE has consistently advocated for an unconditional increase in production, arguing that current market conditions justify higher supply. Over the medium term, it aims to raise output capacity to 5 million barrels per day (mbpd); around 1.5 mbpd above its current quota. This created a structural tension within OPEC, where production ceilings may constrain the UAE’s ability to fully utilize its planned capacity.

In the near term, output is effectively limited by reduced export capacity due to disruptions in the Strait of Hormuz. However, the UAE’s strategy is clearly forward-looking: positioning itself to capture a larger share of global markets once logistical constraints ease and production caps are revisited.

When conditions stabilize, the UAE will be able to increase production without being bound by OPEC limits. That matters in a market that is likely to remain volatile for some time. It also gives Abu Dhabi greater control over how it responds to shifts in demand and supply. This will likely trigger countermeasures from other producers, especially Saudi Arabia, further intensifying competition for market share.

The UAE is placing greater emphasis on control, flexibility, and direct management of its interests. That applies to partners, to institutions, and to adversaries.

There is also a precedent. Qatar left OPEC in 2018 during the blockade imposed by its GCC partners. That decision was not only about energy policy but it was about positioning. The UAE is now doing something similar, but in a far more consequential context. By doing so, it is also trying to shed light on a systemic crisis in the region and globally and demanding an international response or repercussion.

The war has introduced a level of uncertainty that makes flexibility more valuable than coordination. When flows through Hormuz are disrupted, when vessels hesitate to transit, and when insurance costs become prohibitive, the ability to adjust production quickly becomes more important than adherence to group quotas. For the UAE, this is not only a constraint to be removed but an opportunity to reposition itself.

UAE-Saudi Rift

The UAE’s move also needs to be understood in the context of its relationship with Saudi Arabia. The divergence between the two countries did not begin, or end, with the war. It has been building for nearly a decade and since 2016, the relationship has gradually shifted from alignment to competition. Vision 2030 and the UAE’s economic model are not complementary. They compete for the same capital, the same logistics role, the same talent, and the same position in the global economy.

Yemen made those differences visible earlier this year. What began as a joint military effort in 2015 evolved into a series of disagreements over objectives, partners, and outcomes in the decade that followed. That divergence is no longer tactical as heightened military conflict was seen just back in February. It reflects a broader difference in how each country approaches the regional order and its own role within it.

The war paused that tension for a short period but it obviously did not resolve it. If anything, it has brought it back into focus. The UAE’s decision to leave OPEC without consulting Saudi Arabia is part of that story. It signals a willingness to act independently on issues that were previously managed within a framework of coordination. That framework was fragile before the war, and this decision effectively broke it.

The decision creates a difficult moment for OPEC and for Saudi Arabia. OPEC has always relied on a degree of cohesion among its leading producers, and the UAE stood as the group’s fourth largest producer. That cohesion is now under strain. The UAE’s exit weakens the perception of unity and raises questions about how durable the current structure is under prolonged pressure. As of now, only Saudi Arabia and Kuwait are OPEC members from the GCC which now need to work more closely with Iran and Iraq.

Shifts Across the GCC

The broader question is whether the UAE’s move remains limited to OPEC or becomes part of a wider pattern. Abu Dhabi has already signaled that it is reassessing its position across multiple organizations. Other states in the region are also reviewing their options. The war has forced a reconsideration of how these multilateral frameworks, bilateral relationships, and foreign investments function, and whether they are worth maintaining in their current form.

But this is not a move toward isolation. The UAE is not configured for isolation as a policy option. Its economic model depends on openness. It relies on being a hub for trade, logistics, finance, aviation, and global movement. That will not change. All six GCC states are on the same boat.

What is changing is how they approach their relationships. The UAE is placing greater emphasis on control, flexibility, and direct management of its interests. That applies to partners, to institutions, and to adversaries. Even with Iran, the UAE is likely to maintain a managed relationship after the war. Managing relations does not require trust. It requires a clear understanding of interests and limits.

The same applies across the GCC. These states are not moving toward disengagement from the international community. Quite the opposite, but they are moving toward more selective engagement. There is now less assumption of alignment and more differentiation in how each state responds to the same set of pressures.

For years, the Gulf was often described as a bloc. That description was always incomplete and the war has made clear that each state is operating according to its own calculus. The UAE is moving earlier and more openly than others, but it is not alone in that direction. The decision to leave OPEC is one step in the process of reevaluating policy options and reflects a region that is no longer coordinating under a shared framework, but adjusting under pressure, each state in its own way and seeking to establish its agency within the international system.

Mehran Haghirian is the Director of Research and Programs at the Bourse & Bazaar Foundation. His work centers on conflict resolution and diplomacy, with a particular focus on the Persian Gulf region. Haghirian holds a PhD in Gulf Studies from Qatar University. He currently leads the Integrated Futures Initiative and the Rihla Initiative for Green Economic Growth.

Jessica Obeid is Founding Partner of New Energy Consult (Dubai) and a senior energy engineer and strategist with over 17 years of experience across the Middle East, Africa, and Europe. She has advised governments, the private sector, and multinational institutions in more than 40 countries, and has held roles at Chatham House, the Middle East Institute, SRMG Think, and the United Nations Development Programme, among others. Jessica is a Gulf Committee Member of the Rihla Initiative for Green Economic Growth.

Section: (integrated-futures-initiative) Photo: Government of Dubai Media Office

By Rumaitha Al Busaidi

During the initial 39 days of war, U.S. and Israeli strikes on Iran moved beyond oil depots to energy and petrochemical infrastructure and Iranian retaliatory strikes hit power, fuel, and desalination systems across the Gulf. More than 400 incidents carrying potential environmental risk have been documented across the region and the environmental consequences have widened with every new category of target.

Somewhere in the Gulf today, a desalination plant damaged by strikes is being assessed for structural and environmental contamination. The chemicals it needs to operate still arrive by sea, through a strait that has been effectively closed for two months. Families at the end of that chain do not track shipping indices or ceasefire terms. They turn on a tap.

Bushehr, Iran’s only operating nuclear power plant, has emerged as one of the most alarming flashpoints. Iran reports that it has been struck four times. The International Atomic Energy Agency has warned of a serious risk to nuclear safety. Qatar’s Prime Minister, who revealed that his government had simulated the effects of a Bushehr incident, put the consequences plainly: no clean water, no fish, no life. Gulf desalination plants are not designed to filter radioactive material. If contamination enters the sea, it enters the tap.

The environmental cost of this war is now embedded in the conditions of life across the Gulf. It is moving through contaminated waters, disrupted food systems, threatened desalination infrastructure, and ecosystems absorbing more stress than they were built to withstand.

Pollution from uncontrolled fires may enter soil and water, leach into groundwater, and be absorbed by crops. The war’s carbon footprint is accumulating alongside the visible destruction. Analysis of the first 14 days of fighting estimated more than 5 million tonnes of carbon dioxide equivalent—more than the combined annual emissions of 84 nations. The largest share came from the destruction of civilian buildings, homes, schools, and hospitals. Burning fuel in storage and targeted depots added another major share. Methane leaks from damaged gas infrastructure, rerouted civilian aviation, and the fuel consumption of thousands of combat flights are contributing to an atmospheric burden that will outlast the fighting itself.

Reconstruction will deepen that burden further, as damaged infrastructure is rebuilt using concrete, steel, and other energy-intensive materials. These emissions are part of the same chain of damage already moving through water systems, ports, coastlines, and food supply chains.

Ecological damage does not respect borders or battlefields. After a strike sank an Iranian warship off Sri Lanka, satellite imagery documented a 12-mile oil spill, illustrating how quickly the geography of this war has expanded. Toxic smoke from burning fuel and petrochemical infrastructure has drifted across urban populations and into ecosystems along major migratory corridors.

Over Israel, where more than 500 million birds cross each spring along the African-Eurasian flyway, air defense systems have shot down cranes and pelicans after mistaking them for incoming drones.

Across the Gulf, the pressure extends from sky to sea. Smoke, pollution, repeated explosions, and sustained maritime disruption are placing additional strain on ecosystems already weakened by warming seas, salinity, and chronic contamination. These waters are home to the second-largest dugong population in the world after Australia who are now threatened.

By mid-March, the region’s food import pathways were already under strain, with scarcity and price increases of between 40 and 120 percent reported across the region. Roughly 20,000 seafarers on nearly 2,000 ships remain stranded on either side of the waterway, a situation the United Nations has described as unprecedented in the post-Second World War era. Even during pauses in bombing, ecological risks continue to accumulate as vessels remain trapped, consuming fuel, rationing supplies, and operating as potential sources of pollution in confined waters.

This conflict has exposed the water-energy-food nexus in its most immediate form. The Strait of Hormuz carries around a fifth of the world’s oil. Gulf states remain deeply dependent on food imports, with more than 70 percent of GCC food supplies moving through Hormuz. Freshwater production relies heavily on desalination, which in turn depends on continuous energy and a steady maritime flow of chemicals, spare parts, and operating inputs. When the strait closed, pressure fell on all three systems at once.

The environmental cost of this war is now embedded in the conditions of life across the Gulf. It is moving through contaminated waters, disrupted food systems, threatened desalination infrastructure, and ecosystems absorbing more stress than they were built to withstand.

The 1991 Gulf War remains the closest precedent and offers one measure of the cost ahead. The United Nations Compensation Commission processed claims seeking roughly $352.5 billion and awarded $52.4 billion in compensation, including more than $5 billion for environmental and public health damage. It established that environmental harm from armed conflict can be documented, valued, and compensated at scale.

Today’s damage is broader and more complex. The ecosystems now absorbing the burden of this war were already under strain from chronic pollution, water insecurity, and rising environmental pressures. The scale and spread of industrial targeting raise the prospect of a far more complex remediation challenge. The damage is still accumulating, and the question of who will bear the cost remains unresolved.

A temporary pause cannot stop pollution from moving through soil and sea, carbon from settling into the atmosphere, or ecosystems from unravelling under pressures that long predate this war and will long outlast it. The region’s ecology is recording the price of this conflict in real time. Future generations will live inside that record long after the battlefield falls silent.

Rumaitha Al Busaidi is an Omani climate strategist, policy advocate, and sustainability leader currently serving as Business and ICV Development Manager at Hydrogen Oman (Hydrom). She is also the Vice President of the Environment Society of Oman. She is a member of the Gulf Committee of the Rihla Initiative for Green Economic Growth.

Section: (rihla-initiative) Photo: IRNA

Over the past decade, the member states of the Gulf Cooperation Council (GCC) have established themselves as central actors in climate finance across the Global South, deploying capital at scale, shaping investment corridors, and positioning themselves within the next phase of global green development. The war now unfolding in and around the Gulf is jeopardizing the GCC’s climate finance ambitions.

In this piece, Gulf-based climate policy experts Aisha AlRumaihi, Owais Jwaied, Ahmed Samir Elbermbali, Rumaitha Al Busaidi, Deema Almasri, Jessica Obeid, and Dawud Al Ansari offer an initial assessment of the impacts of the war.

The contributors are all members of the Rihla Initiative for Green Economic Growth, which brings together practitioners and policymakers working across energy, climate finance, infrastructure, and economic strategy in the Gulf and the Global South.

Across the contributions, the impact of the war becomes clear. Gulf investment will become more selective, more closely tied to resilience and security, and more attentive to the systems that underpin economic stability, such as utilities like water and energy, trade flows, or digital infrastructure. Capital is unlikely to retreat from the Global South, but will be redeployed with greater emphasis on strategic alignment, risk management, and long-term positioning. This reordering of priorities will shape not only the scale and direction of GCC investment, but also the structure of climate finance across the Global South in the years ahead.

Gulf Climate Finance Is Adapting, Not Retreating

Aisha AlRumaihi

The war has disrupted supply chains, increased uncertainty, and raised the cost of long-term investment. In this environment, investors are expected to become more cautious, prioritizing shorter-term and lower-risk opportunities over climate projects that depend on stability and extended planning horizons. At the same time, heightened geopolitical risk has reinforced the importance of energy security, which may lead some GCC countries to sustain or expand oil and gas production in the near term. This may slow elements of the transition, but it does not suggest a departure from longer-term climate objectives.

These pressures are also creating new openings. GCC countries are expected to increase investment in local innovation, regional capabilities, and domestic industries across renewable energy, green technologies, and sustainable infrastructure. This shift reduces exposure to external disruptions while strengthening resilience within national economies. At the same time, recent developments have elevated food and water security as core components of the climate finance agenda, pushing toward a more integrated and systems-based approach to sustainability.

The effect of the war is a shift in the form of Gulf climate finance rather than a retreat from it. Investment is becoming more flexible, more adaptive, and more closely aligned with resilience, while continuing to support clean energy, infrastructure, and climate partnerships across the Global South.

Gulf Green Investment Is Becoming More Selective

Owais Jwaied

Regional conflicts are unlikely to curtail GCC engagement in climate finance across the Global South. They are, however, reshaping its priorities, geographical orientation, and strategic function. The conflicts in and around the region are pushing Gulf states to view green investment not only as a mechanism of decarbonization, but also as an instrument of strategic resilience. Economic security, energy security, and climate resilience can no longer be treated as separate domains, particularly given the vulnerabilities associated with the Strait of Hormuz and repeated threats to critical infrastructure.

Climate finance is increasingly being integrated into a broader GCC strategy aimed at reducing exposure to shocks, protecting trade routes, and consolidating regional influence. This shift is making Gulf green investment more selective and more closely shaped by security considerations, even as countries such as the UAE, Saudi Arabia, and Qatar retain the financial capacity to invest abroad. Projects that combine climate and strategic value are likely to be prioritized, including grid resilience, desalination, food security, strategic ports, battery storage, green logistics, and renewable energy linked to industrial corridors.

The main effect of the war is not a reduction in Gulf climate ambition, but a narrowing of how and where that ambition is deployed. Without stronger de-risking mechanisms, blended finance structures, and local institutional capacity, more fragile parts of the Global South risk receiving less transformative finance, even as GCC green investment continues at scale.

Gulf Climate Finance Is Under Pressure

Ahmed Samir Elbermbali

Before the war, Gulf climate finance had real momentum. Major sovereign funds, infrastructure commitments, and clean energy deals had positioned the region as one of the few actors with both the capital and the time horizon to drive investment across the Global South. This mattered in a context where climate finance needs were already far outpacing delivery, particularly in lower-income and frontier markets.

That trajectory is now under strain. The region expected to anchor the next phase of global green investment is operating in a more constrained environment, shaped by heightened risk, pressure on infrastructure, and a weaker outlook for long-term capital deployment. Gulf climate finance has not receded, but it is facing more difficult conditions at a moment when demand for it remains high.

Capital depends on stability to move at scale. The immediate effect is not a collapse in Gulf climate ambition, but a slowdown in delivery. Commitments may remain in place, but implementation is likely to take longer, risk appetite is narrowing, and the gap between pledged and deployed capital is set to widen.

Environmental Risk Is Reshaping Gulf Climate Finance

Rumaitha Al Busaidi

The environmental cost of the war is becoming central to water security, maritime stability, and the systems that sustain daily life. As pressure on energy infrastructure reveals structural vulnerabilities, desalination systems are emerging as a critical point of exposure. Facilities damaged by strikes are being assessed not only for structural integrity, but for environmental contamination, while the chemicals required for their operation continue to depend on maritime access through a strait that has been under sustained disruption.

Beyond individual facilities, the environmental footprint of the war is expanding across systems and geographies. Early analysis of the first weeks of fighting estimated more than 5 million tonnes of carbon dioxide equivalent, exceeding the annual emissions of dozens of countries. Toxic smoke from fuel and petrochemical fires, oil spills moving across maritime routes, and damage to marine ecosystems are placing additional strain on environments that were already under pressure. These dynamics are exposing the water-energy-food nexus in its most physical form. The Strait of Hormuz carries around a fifth of the world’s oil, more than 70 percent of GCC food imports move through it, and freshwater production depends on energy-intensive desalination supported by steady maritime supply chains. When the strait came under pressure, all three systems were affected simultaneously.

This has direct implications for Gulf climate finance. The war is shifting capital toward environmental resilience, water security, and the protection and repair of critical systems. Investment priorities are placing greater weight on safeguarding infrastructure, managing ecological risk, and strengthening the systems that sustain daily life, both within the Gulf and across similarly exposed regions.

Water Security Is Moving to the Center of Gulf Investment

Deema Almasri

The war is exposing a vulnerability that has long been overshadowed by the focus on oil and gas: water. With direct strikes on energy and civilian infrastructure, including water tankers and desalination plants, the Gulf is being forced to recalibrate. The era of large external climate and green economic investments is being reassessed, with greater emphasis now placed on domestic infrastructure resilience.

From a water security perspective, this shift is not surprising. In the Gulf, water and energy are tightly interconnected. Desalination accounts for a significant share of electricity use across GCC countries, and in a region where more than 90 percent of municipal water depends on desalination and groundwater, disruptions to power infrastructure translate directly into water insecurity. Recent developments have made clear that energy infrastructure is also water infrastructure. This is changing the underlying logic of investment. Efficiency and cost optimization are no longer sufficient. Redundancy, flexibility, and the ability to withstand disruption are moving to the centre of planning and financing decisions.

This will shape Gulf climate finance at home and abroad. Outward investment is unlikely to disappear, but it is becoming more selective and more closely tied to resilience and security objectives. Capital is expected to prioritise projects that strengthen food systems, water and sanitation, clean and reliable power, and supporting infrastructure across the Global South. In this context, investment decisions are increasingly guided by the extent to which they contribute to shared resilience and long-term stability.

Resilience Is Driving the Next Phase of Gulf Renewable Investment

Jessica Obeid

The vulnerabilities exposed across water and environmental systems are mirrored in the region’s energy infrastructure. The conflict in the Middle East is destabilizing energy markets, but it is also set to drive the next phase of GCC green investment, particularly across the Global South. Energy infrastructure has long been a target in times of war, but recent developments have elevated pipelines, refineries, and LNG facilities into instruments of geopolitical and economic pressure. From drone strikes on Gulf energy assets to the use of fuel supply as leverage, these dynamics have exposed the risks embedded in fossil fuel-dependent systems and oil-based economic models.

This is shifting investment priorities. Sustainability, efficiency, and resilience are taking on a more central role as pillars of economic and energy security. Over the medium to long term, the move toward localized and clean energy systems is expected to accelerate, driven increasingly by security considerations. GCC countries are well positioned to shape this transition, supported by capital capacity and a strategic approach focused on geographic diversification and long-term positioning in global energy markets.

For Gulf climate finance, this translates into a stronger focus on decentralised renewable systems, including solar generation, battery storage, and distributed microgrids, which are structurally more resilient than concentrated fossil fuel infrastructure. Investment in these systems across the Global South serves not only climate objectives, but also longer-term economic and strategic interests. Gulf capital is therefore likely to remain active at scale, with resilience emerging as a core driver of deployment.

Climate Technology Is Gaining Strategic Importance in the Gulf

Dawud Al Ansari

It may be tempting to assume that climate tech will become less relevant in the post-war Gulf. Crisis conditions tend to shift attention toward hard security, reconstruction, and economic stabilization, while foreign direct investment is likely to become more constrained. Yet the opposite may prove true. The war is reinforcing the importance of resilience and the internalization of financing, while pre-existing domestic priorities, particularly the need to diversify economic structures, remain firmly in place.

Declining FDI is unlikely to halt economic expansion in the GCC, but it will change how it is financed. Where foreign capital becomes less reliable, domestic funding will need to compensate, and GCC sovereign wealth funds have the institutional capacity to do so. This is likely to expand the range of sectors supported domestically and lower the threshold for investments justified by resilience. At the same time, industrial policy priorities are likely to be reassessed. Under these conditions, expected returns alone no longer determine sectoral viability. Greater weight is placed on whether a sector can be financed independently, operate with limited external dependency, and contribute directly to systemic resilience.

Climate tech meets these criteria. Defined as the engineering and systems-level adaptation of infrastructure, water, and the built environment to climate stress, it connects domestic development, strategic resilience, and external engagement. For Gulf climate finance, this implies a greater focus on adaptation infrastructure, water systems, and other engineering-intensive sectors, alongside continued outward investment. The war is therefore likely to elevate climate tech within GCC economic planning and investment strategies, rather than marginalize it.

Section: (rihla-initiative) Photo: Acwa

By Esfandyar Batmanghelidj

For eight years, Iran has been subjected to the most comprehensive sanctions program ever devised, targeting nearly every sector of the Iranian economy. For forty days, Iran was targeted with one of the largest air campaigns in history, with nearly 100 airstrikes per day targeting military sites, government buildings, industrial facilities, and civilian infrastructure. While Iran’s economy has been significantly impacted by the war, the combination of sanctions, airstrikes, and most recently, a naval blockade has not led to an outright economic collapse.

Iran’s economic resilience has flummoxed U.S. officials and boosters of Trump’s “maximum pressure” sanctions. For eight years, U.S. policymakers promised that sanctions would “crush” the Iranian economy. Economic pressure was intended to achieve one of two outcomes. Either the Islamic Republic would make broad concessions to the United States, or it would be toppled in a revolution fueled largely by economic grievances. Instead, the U.S. found itself launching the kind of war that sanctions were meant to avoid. So far, the Iranian economy has demonstrated enough resilience to enable Iranian leaders to draw their much more powerful adversaries into an attritional conflict.

Despite waging economic war on Iran for the better part of two decades, American policymakers have a poor understanding of the Iranian economy. Numerous datapoints would have enabled the Trump administration to anticipate Iran’s ability to sustain most industrial output during wartime conditions.

Inventory Data

Perhaps the clearest indication of this underlying resilience can be seen in data for “days of inventory outstanding,” a standard measure of inventory levels of raw materials, work-in-progress goods, and finished products. This data can be found in the quarterly filings of the more than 700 companies listed on the Tehran Stock Exchange.

Looking at the most recent reports, which were filed in December 2025 in accordance with the third quarter of the Iranian calendar year that ended in March 2026, it becomes clear that Iranian firms held high levels of inventory at the outbreak of the war.

Inventory levels ranged between two weeks and six months depending on the subsector. On average, looking across 30 industrial subsectors, Iranian companies maintained 96 days of inventory. This is about 30 days more inventory than reported by European manufacturers, which have notably increased stock levels in recent years in response to geopolitical shocks. Iranian inventory levels exceed those maintained by American firms by about 40 days.

The variation in Iranian inventory levels is explained by the type of final product, import dependence, and sanctions vulnerability. Companies in subsectors that are largely exempt from sanctions, such as food and beverage manufacturing, or sectors that have limited dependence on imported intermediate goods, such as the petrochemical sector, typically maintain lower inventory levels.

Companies that are highly dependent on imported parts and equipment and are significantly targeted by sanctions, such as those in the industrial equipment or electrical machinery subsectors, maintain the largest inventories. Crucially, these are the sectors most closely connected to Iran’s defense production. Just as Iran reportedly maintains around 40 percent of its drone arsenal and 60 percent of its ballistic missile launchers after forty days of conflict, it also likely maintains extensive inventories of the materials and parts necessary to sustain production of those weapons systems.

Somewhat counterintuitively, Iranian firms have significant financial incentives to maintain large inventories, especially of imported materials and parts. In light of Iran’s persistent currency devaluation, companies use their inventories as a kind of inflation hedge. Rather than hold cash, companies seek foreign currency allocations from the Central Bank of Iran and import materials, parts, and machinery that are likely to appreciate in value in local currency terms. In this way, inventories provide a boost not only to supply chain resilience, but also to corporate balance sheets.

Importantly, the stock levels reported in company filings do not reflect availabilities of all materials or products, just an average. Across industrial subsectors, Iranian firms are beginning to run down inventories. Concerning shortages of certain goods have materialized following the disruptions of the war. But the practice of maintaining large inventories means that such pressures are mounting more gradually and slowly than many U.S. policymakers expected.

Bottom-Up Resilience

The upshot of this analysis is that Iran’s economy is more resilient to sanctions, pressure or blockades than is widely recognized. Should Iran experience a near total interruption in trade, inventories could be stretched in the face of depressed demand or managed through wartime rationalization. Of course, such interruptions remain unlikely, even if the U.S. blockade is strictly enforced. Around half of Iran’s non-oil trade is conducted via overland corridors and through Caspian Sea ports. The combination of large inventories, demand rationalization, and alternative supply chains suggests that Iran’s wartime economy could sustain most industrial production for at least three months, and possibly for as many as six, before significant contractions in output are felt.

Notably, unlike Russian policymakers, who mobilized state resources at the outset of the invasion of Ukraine to boost defense production and shore up domestic manufacturing, Iranian policymakers have largely left firms to their own devices, both during the eight years of sanctions and the recent forty days of war.

In this respect, Iran’s wartime endurance is less a reflection of the power of the Islamic Republic, and more an indication of the underlying structural resilience of the Iranian economy and the firms and households from which it is composed. Among industrial firms, resilience has been achieved through indigenization or diversification of supply chains, the maintenance of large inventories, and the prioritization of technological simplicity and efficiency. American policymakers did not account for these adaptations because they have not waged war against an industrialized country in over 80 years.

Shaped by years of sanctions disruptions, the Iranian approach to industrial management is characterized by a readiness for worst case scenarios, including military conflict. Ironically, Trump’s decision to impose maximum pressure sanctions, while contributing to a slowdown of economic growth in Iran, may have spurred the development of an industrial base more resistant to supply-chain shocks, such as the disruption to maritime traffic in the Strait of Hormuz. Arguably, Iranian leaders were only able to weaponize the closure of the strait because of bottom-up adaptations, such as high inventory levels, that made Iran’s economy less vulnerable to the inherent disruptions to maritime trade.

Of course, the greatest threat to Iran’s economy is not disruptions to trade flows, but rather direct targeting of industrial infrastructure and utilities by the U.S. and Israel. Attacks on major steel and petrochemical facilities have hit production in those sectors, putting millions of jobs at risk.

Trump’s threat to bomb Iran’s major power plants, issued just before the ceasefire went into effect, reflects U.S. frustration with the resilience of the Iranian economy. Destroying Iran’s power plants would absolutely hobble Iranian industrial production. But it would also constitute a war crime and would trigger catastrophic Iranian attacks against power plants and desalination facilities in the Gulf states. Trump may be able to shorten this war by intensifying it, but his options to do so would make the war much costlier for the global economy.

Esfandyar Batmanghelidj is the Founder and CEO of the Bourse & Bazaar Foundation.

Section: (integrated-futures-initiative) Photo: Ali Hamed Haghdoust

By Henna Moussavi

From more than 4,000 kilometers away, Tehran arrives as a man’s voice heard through a pair of headphones. The speaker, referred to here as Nima, is a civil servant working extended shifts in the middle of an unprecedented aerial bombardment, observing how a city of millions absorbs active conflict and is altered by it.

Internet access in Iran was severed on the first day of the war, and those contacting foreign entities still risk prosecution. Nima used a VPN without certainty it would hold. “I was a bit hesitant,” he says, “mainly because these VPNs aren’t reliable… so I thought I should say this now, and you can listen whenever you’re able.” The recordings reflect a kind of precarity, while the background noise of music and traffic serves as a reminder that life in the city continues.

Walking through a city responding to destruction, he recorded several hours of voice notes during long hours on the job, with the rhythm of someone thinking out loud. His reflections trace fractures in public opinion, the destruction of infrastructure, and the informal systems that emerge to fill gaps left by the state.

Informal Resilience

One of the more striking features of Nima’s testimony is his description of how Tehran residents had to improvise in the absence of functioning state services. “During the Iran-Iraq war, there were clear air raid sirens. People knew when to go to shelters. There was a recognisable system. In this war, that hasn’t really existed,” he explained, as the defence infrastructure that would enable early warning was largely damaged at the outset of the war. In their place, with roots in the 12-Day War in June, an informal system has emerged.

“People themselves have effectively created an informal warning network,” Nima explains. When someone hears fighter jets overhead, they message their contacts, and those contacts message theirs. On domestic platforms—Bale, Eitaa, Soroush, Rubika, or specialised Telegram channels like RahBandoon—people post real-time notices, ensuring that “information spreads quickly between people and across different areas.” A message may warn about jets over northern Isfahan, another about airstrikes Mazandaran, and others with updates from Tehran. While people can still be nervous to confide in and openly message on these public forums, they have been invaluable resources in the absence of better warning systems.

Many users make attempts to infer trajectory and timing based on observation, estimating where a strike might land and how many minutes remain. This has become particularly important due to the evidence that U.S. and Israeli forces have conducted double-tap strikes, putting aid workers and residents trying to help others at severe risk.

A population experienced in navigating institutional failure has learned to replace reliance on state broadcasts with lateral communication, led by an instinct to protect their fellow citizens. “This, to me, is one of the more striking aspects of what’s happening,” Nima said with some pride.

When residential buildings are hit by airstrikes, the damage is rarely limited to a single address. The impacts are felt throughout neighbourhoods, where residents are quite literally left to pick up the pieces. Neighbors are evacuated and belongings need moving from high floors, quickly.

Volunteer groups have appeared to help search and rescue and cleanup efforts. Some volunteer groups are religious, others are secular. Many travelled from other cities to help in Tehran specifically, due to the disproportionate number of strikes in the capital. “This kind of work requires a large amount of manpower, which naturally cannot be fully provided by government administrative structures. “ As they clear glass from stairwells, carry furniture down ten-storey blocks, and pack the remaining possessions of people whose homes have been damaged.

Divided Communities

Beyond these examples of community resilience, Nima is quick to acknowledge the division of perspectives among his friends, family, and colleagues, not just with regards to the conflict, but in confrontation with the Islamic Republic on the whole. He describes three groups.

There are those who support the Islamic Republic and interpret the war as an existential struggle, one that demands loyalty and national unity to sustain their ideological mission of anti-Western and anti-imperial sentiment. There are others who reject the government and, in this case, saw external pressure as a necessary, if uneasy, means of forcing regime change. And then there is a third group, distinct from the latter: individuals who are openly opposed to the Islamic Republic but remain equally resistant to foreign intervention, driven by a deep scepticism that any external power carrying out military action against their country could genuinely be acting in their interest.

As Nima described the situation in Tehran while I followed headlines from afar, it became clear that his observations reflected a kind of equanimity that one achieves through proximity to hardship and devastation.

A defining feature of the third camp is how it recognizes that whatever the outcome of this conflict, whether a ceasefire is upheld or not, ordinary Iranians will bear the cost. They anticipate that, in the aftermath of the war, the Islamic Republic will only emerge more repressive, using the war as justification to tighten control over all aspects of social and political life in Iran. This has become more apparent with continued executions, arrests, and restrictions on internet access and other public freedoms, which have been even more aggressive since 28 February.

The different groups have been visible during the war. “Almost every night there have been gatherings in streets and alleys that would normally be empty, it feels like the whole city is involved,” Nima explains. These gatherings included pro-government rallies and quietly defiant New Year celebrations, where dissent is felt, if not openly expressed. Sometimes dissent was heard, if not seen, as in the case of slogans chanted from apartment buildings, celebrating the death of the Supreme Leader Ali Khamenei.

But in the midst of war, political sentiments became even more complicated. “Even among people who were critical of the government, I heard something quite striking: if they noticed anything suspicious, especially given concerns about internal incidents, they would report it,” Nima explained. “Some people said they had never done such a thing before, but during that period they even called official numbers, like those of the intelligence services, to report suspicious activity.”

Likewise, when U.S. President Donald Trump warned that “an entire civilization” would die if Iran did not yield to U.S. demands, many Iranians were dismayed by the indiscriminate nature of the threat. “There was less visible effort, even rhetorically, to distinguish between the government and the population,” Nima noted.

When imagining Iran’s future, public imagination appears to oscillate between two poles: North Korea, a country home to an entrenched authoritarian regime, and Libya, a country that has collapsed into lawlessness and disorder.

“Overall, there’s a feeling of uncertainty,” he states, “people are trying to adapt, but no one really knows what’s coming.” If understanding Iran’s political trajectory is challenging from afar, Nima’s account suggests that the same uncertainty, disagreement, and contestation persist within the country itself. Even the boundaries between the three camps Nima identified at the outset of the conflict have begun to blur, as ideas and allegiances shift between them and individuals reassess their positions in light of the war’s personal impact on their lives. What emerges is not a singular public mood, but a society negotiating its divisions in real time, under the pressure of conflict.

Wartime Routines

With the way events have unravelled, “many people are pessimistic,” Nima concludes. “They don’t think the aftermath of the war will improve things. Economically, the damage could take years to repair. There’s a general sense that even when it ends, life won’t return to normal quickly.” But he is also able to reflect the spirit Iranians have been able to sustain during the war, laughing to himself as he recalls the moment Tehran’s residents suspected the water might be cut off​​—the first priority for his friends and family was “taking a shower.”

Nima sounds unsure about the ceasefire and the high-level talks between the U.S. and Iran. “It’s not clear how serious or advanced these talks are, or how willing each side is to make concessions. Past experience hasn’t been very encouraging, and there isn’t much public confidence that negotiations will lead to a meaningful agreement.”

In a final voice note recorded in the days after a ceasefire was announced, Nima describes what those last hours of bated breath felt like from inside the city. Trump’s deadline for catastrophic attacks on Iran’s power plants had been extended several times before. Most people assumed it would be extended again. But as the clock moved toward the final cut-off, set for around 3:30 a.m. local time, no announcement was made and the atmosphere shifted.

Roads out of Tehran were congested, with petrol stations surrounded by growing queues. Inside homes, people filled containers with water, charged phones and power banks, and scrambled to buy generators, anticipating a blackout they weren’t sure was coming but couldn’t rule out. There was the expectation of cascading failure. Logically, electricity goes first, then water, then the already-fragile mobile networks, then fuel.

Much of Tehran simply stayed awake. Nima himself fell asleep from exhaustion at some point, but woke to the confirmation that a ceasefire in fact had gone into effect. His account of these delicate moments was palpably nerve-wracking, though he maintained a degree of humor throughout. As Nima described the situation in Tehran while I followed headlines from afar, it became clear that his observations reflected a kind of equanimity that one achieves through proximity to hardship and devastation.

The following day, he recalled, “the atmosphere was strange.” Petrol stations fell quiet and traffic returned. By Friday, coinciding with the end of the Nowruz holiday period as well as the end of the Iranian working week, cars were flowing back into the city. Offices were operating at roughly half capacity. Schools and universities remained closed, running mostly online, but still running.

Nima is not a soldier or politician, but a civil servant going about his life in a city fundamentally altered by the conflict. His voice notes, sent intermittently across 40 days of war, reflect the precarity of the subjects he discusses. “The emptied-out Tehran, which we saw even before the New Year, has regained its energy,” he concludes, his voice calm.

“In a way, this is natural. People need to reopen their businesses and get back to work. The reality is that, over time, even wartime conditions begin to feel routine.”

The subject’s name has been changed to protect his identity.

Henna Moussavi is a reporter for The Wall Street Journal, focusing on Iran. Her writing spans political and cultural coverage of the Middle East, and beyond, and she has previously held editorial roles at the Middle East Institute, the Bourse & Bazaar Foundation, and the Oxford Middle East Review.

Section: (vision-iran-initiative) Photo: IRNA

By Hadi Kahalzadeh

After forty days of war, Iran’s families are returning home under a fragile ceasefire. But the pause in the conflict may not prevent the coming shock to Iran’s economy. As ordinary Iranians confront the destruction of roads, ports, and industrial infrastructure, they are discovering that the war has taken away their jobs, their wages, and, for many, their only means of survival. If this war had a hidden target, it was not Iran’s military power projection; it was the labor market that sustains the livelihoods of ordinary citizens.

War has damaged more than 125,000 residential and civil buildings, including 339 health facilities, 32 universities, and 857 schools, and has directly destroyed over 20,000 industrial units, forcing many related businesses to shut down. In other words, around 20 percent of the country’s production units have been directly damaged. Iran’s ports and transportation systems, which move essential goods and raw materials across the country, have also been heavily damaged. According to some estimates, the war has already cause more than $300 billion worth of damage to civilian infrastructure alone, excluding military facilities. This staggering figure captures only the reconstruction cost, not the wider economic toll.

But war does not just destroy buildings. It breaks economic systems. Supply chains, transport networks, and commercial services have been disrupted, and many firms have suspended operations under the combined pressure of war, inflation, recession, and collapsing demand. What makes this especially striking is the pattern of the damage. The sectors hit hardest by U.S. and Israeli airstrikes represent the core pillars of employment and production: steel, construction, petrochemicals, pharmaceuticals, and retail.

Job Uncertainty

The pattern of attacks on infrastructure suggests that Israel and the United States mapped Iran’s labor market and struck at its core pillars. Among the thousands of destroyed production units, the damage to Iran’s steel sector is especially consequential. A review of Iran’s Labour Force Survey and Manufacturing Industries Survey suggests that steel is a critical input for 42 percent of Iran’s industrial supply chain and underpins activity across manufaturing, including automotive production, and construction. When steel supplies are interrupted, the consequences spread far beyond the plants themselves, rippling through manufacturing, transport, building activity, and the many jobs connected to them.

By my estimate, disruption to steel production and distribution threatens 1.8 million jobs across industrial sectors and 3.8 million jobs tied to construction. The petrochemical and pharmaceutical units, which were also damaged in the war and together account for around 30 percent of Iran’s industrial output, represent another major source of labor-market exposure. Because these sectors supply critical industrial inputs and essential goods, their disruption puts another 1.2 million jobs at risk.

About 10 to 12 million jobs, roughly 50 percent of Iran’s workforce, are now at risk. That does not mean all of those jobs have already disappeared. It means that a very large share of Iranian workers, mostly in the informal sector, now live under the shadow of furloughs or layoffs.

Even firms and sectors that have not been bombed are scaling back amid broader pressure from the war. Faced with recession, liquidity constraints, weak demand, and deep uncertainty about what comes next, many are suspending production, postponing investment, and halting expansion. Inflation has made that shock even harsher. In March, point-to-point inflation reached 72 percent, one of the highest rates since the revolution. The long shutdown caused by the war, combined with falling family incomes and fears of further escalation, has reduced private consumption and depressed demand nationwide. Many small firms had hoped that the end-of-year season and the period around Nowruz would offer a chance to recover income through sales and service activity after earlier closures and lost sales. Instead, many now face insolvency and shutdown.

The effects are especially visible in wholesale and retail trade, which employs 17 percent of Iran’s labor force, or roughly 4.1 million jobs. Taken together, industrial production, construction, wholesale and retail trade account for more than half of total employment in Iran. This does not mean the agricultural sector or other parts of the service economy have been spared. But because internet shutdowns have sharply limited visibility into conditions across regions and occupations, the full extent of labor-market damage remains difficult to measure in real time.

Considering the pattern of attacks, about 10 to 12 million jobs, roughly 50 percent of Iran’s workforce, are now at risk. That does not mean all of those jobs have already disappeared. It means that a very large share of Iranian workers now live under the shadow of furloughs or layoffs.

Even before the 40-Day War, Iran’s labor market was already fragile. Prolonged sanctions, stagflation, and lingering pandemic effects had weakened the country’s capacity to absorb macroeconomic shocks. From March to September 2025, Iran’s economy contracted by 0.5 percent owing to the compounding effects of drought, the April explosion at Shahid Rajaee Port, and the 12-Day War last June, resulting in the loss of 750,000 jobs.

Given the economic situation after the 12-Day War, the labor market is likely to continue to contract. If no further losses occur beyond those recorded since last September, and if only 30 percent of the 10 to 12 million jobs now at risk are eventually lost, Iran could lose approximately 3 to 4 million jobs. This would represent about a 15 percent contraction of the labor market, marking the largest decline in Iran’s modern history.

Difficult Response

The Islamic Republic appears to have planned for a six-month war scenario, including military readiness, the supply of essential goods, and the provision of subsidized loans, tax incentives, and exemptions for damaged production units. The administration has also announced that those who lose their jobs may be eligible for unemployment benefits equal to 55 percent of their wages, or at least the minimum wage. But many employees in the informal sector may not be eligible for benefits, and the financial burden of these commitments appears to exceed Iran’s capacity to meet them.

Providing 3 to 4 million unemployment benefits for six months, for example, would require nearly IRR 5 quadrillion. A 15 percent contraction in the labor market would also mean a 25 to 30 percent drop in revenue for the Social Security Organization, Iran’s largest pension fund. Filling that financing gap would require another IRR of 5 to 6 quadrillion. Altogether, the financial burden of war-induced unemployment would consume at least 20 percent of Iran’s public budget, which is already running a large deficit.

Whether by design or by consequence, this war has struck at the foundations of how Iran’s most vulnerable citizens work, earn, and survive. An estimated 10 to 12 million jobs are now under threat, putting the main source of income for millions of households in both the formal and informal private sectors at risk. And these estimates do not even include the 22 percent of Iranian households that rely on public-sector wages. As so often in war, the highest costs are falling on those least protected by the state welfare benefits.

Even if the ceasefire holds, Iran’s most vulnerable people will suffer the long-term consequences of this 40-day conflict. The bitter irony of this war is that the very population President Trump claimed to support by this war is now bearing the brunt of the damage.

Hadi Kahalzadeh is a welfare economist. He is a non-resident fellow at the Quincy Institute and a research fellow at the Center for Global Development and Sustainability at Brandeis University. Before his academic career, he spent eight years as an economist at Iran’s Social Security Organization, analyzing the impacts of Iran’s economic and social policies.

Section: (vision-iran-initiative) Photo: Ali Hamed Haghdoust

By Sahand Sehatpour

Iran’s capital markets play a far larger role in the economy than is often appreciated from the outside. The Tehran Stock Exchange and the broader capital market today include more than 700 listed companies across more than 50 industries, while more than 50 million Iranians are tied to the market as shareholders or stakeholders through direct equity ownership, pension funds, fixed-income products, and government debt issuance. Around 70 percent of market turnover is driven by individual investors rather than institutions, a much higher retail share than in developed markets, where institutional investors typically account for most trading. This gives the market a broader retail and social footprint.

Over the past two decades, the market has repeatedly shown an ability to absorb shocks, including sanctions, inflation, currency depreciation and episodes of political unrest, while continuing to function as an important mechanism for savings, price discovery and capital formation. The last year, however, has presented a very different and unprecedented test, combining war, market closures, social unrest and direct damage to strategically important listed industries.

The first major disruption to Iran’s capital markets came during the 12-day conflict between Iran and Israel from 13 to 24 June 2025. During that period, the equity market was closed, while fixed-income instruments and fixed-income ETFs resumed trading only after being shut during the first week. Gold-backed ETFs remained suspended throughout.

The equity market reopened quickly on 28 June, soon after the ceasefire took hold. That reflected an important reality: despite the geopolitical shock, there had been little meaningful direct damage to most listed companies. The challenge was therefore less about destruction of earnings capacity and more about a sudden repricing of risk.

That repricing was significant. Investors who had been unable to access liquidity during the closure moved quickly to reduce exposure once the market reopened, while the conflict itself had raised the overall country risk premium. Much of the market opened at the daily down limit. The Capital Market Stabilization Fund intervened to absorb part of the pressure, but the market remained under strain through the end of August.

Overall, TEDPIX declined by roughly 20 percent in local currency terms in the weeks following the war. Because the index is weighted towards larger names, that figure understated the pressure experienced by many smaller and less liquid companies. Meanwhile, the free market USD/IRR exchange rate continued to rise, meaning the market fell by around 35 percent in dollar terms. Total market capitalization dropped to about $80 billion, one of the lowest levels seen in recent years despite several major IPOs since 2019.

Fragile Recovery

Once the immediate post-conflict selling pressure was absorbed, the market began to recover, supported by a combination of currency adjustment and policy change.

Following the snapback of UN sanctions on 27 September, the USD/IRR exchange rate resumed its upward move. In Iran, this has historically been one of the central drivers of equity performance, particularly for exporters, commodity-related businesses and investors seeking a hedge against inflation and currency weakness.

At the same time, the authorities moved away from the multiple exchange-rate system, including NIMA and other official rates that had traded at a substantial discount to the free market rate. These mechanisms had long distorted pricing, foreign-currency allocation, and corporate earnings. For many listed companies, especially exporters and producers linked to the Iran Mercantile Exchange, subsidized exchange rates had effectively meant monetizing revenues below economic reality. Their removal therefore improved transparency and, in many cases, strengthened the earnings outlook.

This became a major catalyst for the market. The TEDPIX index rose by more than 85 percent in the six months following the war and reached a new high near 4.5 million. In dollar terms, however, the rally was much more modest, at roughly 40 percent, and the market still remained below its pre-war level.

The foreign exchange reforms also created pressure elsewhere in the economy. The removal of preferential rates increased the cost of many basic goods and added to inflationary strains. By late December 2025 and early January 2026, protests had emerged in response to deteriorating purchasing power, the weakening rial and the wider economic environment. Although the demonstrations initially appeared limited in scale, they were geographically broad and reflected a deeper build-up of frustration over living standards. What began as economic protest gradually took on a more overtly political character as inflation accelerated and expectations of further hardship grew.

Iran’s authorities then responded with a much harsher crackdown, which materially increased the domestic political risk premium. At the same time, the external dimension became more serious. Donald Trump signaled that a violent response by the Iranian authorities would not be tolerated and warned of possible consequences if the crackdown continued. That raised fears that domestic unrest could evolve into a broader geopolitical confrontation, particularly against the backdrop of regional military build-up.

At the same time, Iran’s risk-free interest rate rose from around 33 percent before the conflict to above 40 percent by January as fiscal and monetary conditions tightened. That was a meaningful headwind for equities. These factors together triggered another leg down in the market. Equities declined by roughly 20 percent in rial terms and around 30 percent in US dollar terms. As a result, measured in dollar terms, the TEDPIX index fell to a level even lower than in the immediate post-war period.

Direct Impacts of War

While Iran’s capital markets were still recovering from the impacts of the 12-Day War and the January protests, a new war began. The market was open on 28 February when the attacks began, but trading was halted and the day’s trades were cancelled. Since then, cash equities and equity derivatives have remained closed. Unlike the previous conflict, however, fixed-income instruments, fixed-income ETFs, and also gold- and silver-backed ETFs have continued to trade. Gold-backed funds have seen outflows of around $60 million, while fixed-income funds have attracted approximately $130 million of retail inflows.

The impact of the war on the capital markets will be substantial. U.S. and Israeli airstrikes have directly targeted major industrial facilities, including those operated by publicly traded companies. In the steel industry, the most important example is Mobarakeh Steel, the country’s largest hot-rolled coil producer. Other affected companies include Khuzestan Steel, Yazd Alloy Steel and Kavir Steel.

The directly affected companies represent more than 15 percent of the combined market capitalization of the Tehran Stock Exchange and the Iran Fara Bourse, the secondary exchange.

In petrochemicals, the larger issue is the damage to three centralized utility providers serving the Mahshahr and Assaluyeh regions: Mobin, Fajr, and Damavand. These utility facilities supply electricity, gas, oxygen, compressed air and other essential services to the surrounding petrochemical complexes. Because Mobin, Fajr, and Damavand have been put out of service, petrochemical plants across Mahshahr and Assaluyeh have also been affected and, in many cases, forced to cut production. Since more than 80 percent of Iran’s petrochemical output is concentrated in those two regions, the damage has disrupted a very large share of the country’s petrochemical production capacity.

At this stage, timelines for repair remain uncertain, though even constructive estimates suggest a multi-year process. There were also companies in other sectors that suffered damage, but steel and petrochemicals are clearly the most significant from both a market and macroeconomic perspective.

The broader economic implications are straightforward. These sectors are among Iran’s leading non-oil export earners, so disruption could reduce export receipts by close to $15 billion, placing additional pressure on the external balance. The impacted facilities also supply feedstock and industrial raw materials to a wide range of downstream industries. Any interruption therefore has second-order effects, either through lower domestic production or higher import dependence.

Careful Reopening

When the equity market next reopens, the process is likely to be more selective and more disclosure-driven than the reopening after June 2025. The directly affected companies represent more than 15 percent of the combined market capitalization of the Tehran Stock Exchange and the Iran Fara Bourse, the secondary exchange. If one includes listed holding companies with substantial exposure to the impacted companies, the effective share may rise to as much as 25 percent of the market.

The Securities and Exchange Organization will likely require operational updates from listed companies before reopening trading, particularly from those that may have been directly or indirectly affected. The market will need visibility on the extent of damage, the status of production, and the expected timetable for returning to more normal operations.

Once trading resumes, the market is likely to split into two very different stories. For companies directly affected by the conflict, a sizable correction is likely. For the broader market, however, the outcome will depend much more on the political and sanctions backdrop than on the conflict alone.

If the current ceasefire ultimately creates a path towards a broader understanding between Iran and the United States, followed by some degree of sanctions relief and reintegration into the global economy, the current dislocation could create a particularly interesting entry point for investors. It is still too early to determine the precise market reaction, but under such a scenario the period around the reopening could prove to be an important opportunity.

If sanctions remain in place, the adjustment is likely to be more demanding. Lost export capacity would weigh on the trade balance and probably push the USD/IRR exchange rate higher, which could support parts of the market in nominal rial terms but would still leave equities under greater pressure in US dollar terms.

Taken together, the events of the past year have left Iran’s capital markets at an unusually important juncture. Much now depends less on valuation alone and more on the political and economic direction from here: a deal could create a broad and meaningful opportunity set across much of the market, whereas in its absence, opportunities are likely to be narrower and more selective against a more negative outlook for the Iranian economy.

Sahand Sehatpour is a portfolio manager at Amtelon Capital focused on Iranian capital markets, with experience across both public and private investments. His work covers listed equities, market structure, and the broader investment environment in Iran.

Section: (vision-iran-initiative) Photo: Amir Ghoorchiani

By Mehran Haghirian and Mohammed Baharoon

A version of this article was originally published in French in Le Grand Continent.

Beyond the tragedy, the US-Israeli attacks on Iran and the Iranian strikes targeting the Gulf states – which continued unabated from 28 February 2026 until the April 8 ceasefire – have starkly highlighted a glaring absence: the Gulf region fundamentally lacked any security architecture.

The semblance of order that existed before the outbreak of this war was based on a polarization of how the various states in the region perceived security and threats. On the one hand, the Iranian threat to the Gulf Cooperation Council (GCC) and, on the other, the US threat stemming from Washington’s presence in the region dictated a fragile balance based on deterrence, external protection and ad hoc, discreet diplomacy between Iran and the Arab states. This balance has ceased to exist.

The threat is no longer merely perceived: all sides of the Gulf were ablaze.

The question is no longer whether a new regional security framework is needed, but who the actors will be, how they will interact with one another, and whether this new architecture could be purely regional — or whether it needs to extend further.

Restoring Trust and Deterrence

The Iranian attacks have caused a profound rift in Tehran’s relations with the Arab states on the other side of the Gulf and have undermined the tentative trust that had begun to take root through regional diplomacy over the past five years. Rebuilding that trust will be difficult and will take time. Whatever political configuration emerges in Tehran after the war, restoring relations with the Gulf states will necessarily become one of the most important priorities of any future Iranian government’s foreign policy — even if this is a consideration that the Islamic Republic’s new leaders have, for the time being, set aside.

Before the war, expert discussions on the future of the regional security architecture in the Gulf — in which we were involved — focused primarily on the new national security matrix encompassing the domains of energy, food, health and environmental security.

The war will necessitate an even broader reassessment of the Gulf’s security arrangements. And this new analytical framework will not only address the capacity to repel attacks, but it will also have to address the issue of deterrence itself.

One possible consequence of this new paradigm would be to compel the Gulf to become a highly securitised region. The Gulf Cooperation Council will inevitably engage in collective security coordination in the short term, which could include pooling stocks of interceptors, investing in next-generation air defence systems, strengthening crisis communication mechanisms, or establishing security arrangements modelled on NATO mechanisms.

These efforts are likely to become a central feature of the region’s trajectory in the near future, particularly in the context of expanding military ties with a group of countries that have proven themselves to be reliable partners.

Geopolitics of Grand Coalitions

However, contrary to what might have been expected, the resumption of discussions on a strategic alliance in the Middle East bringing together the Gulf states, Israel and the United States may not be an automatic consequence of the war.

Whilst the Iranian attacks might have accelerated such a rapprochement, this is an option that the Gulf states have so far rejected and may continue to avoid, as it would place them in a state of permanent war with a regional neighbor. The GCC states are just as concerned about the Islamic Republic as they are about Israel’s respective regional ambitions — for both powers have shown that brutal military action is their preferred means of resolving disputes. Conversely, the Gulf Cooperation Council’s tradition of patience and strategic restraint means it does not believe that military power alone leads to stability.

In the Middle East, a new order, even after this war, would not mean a total withdrawal of the United States. Nor would it mean, for those with ties to Israel, a complete reversal of that relationship.

Rather, it would involve a careful adjustment aimed at establishing a security architecture that strengthens the autonomy and agency of each state by taking into account the complex network of geopolitical ties and interests.

At the same time, the war has highlighted just how closely the security and stability of the Gulf are linked to global strategic interests: any future regional framework will almost certainly involve external actors whose economic and military presence in the region is already deeply entrenched.

China’s role as a major importer of Gulf energy, a key player in global trade networks and a guarantor of the negotiated détente between Iran and Saudi Arabia ensures that Beijing has a direct interest in preserving maritime routes, energy infrastructure and political stability in the region. Russia, which has already put forward proposals for a collective security framework at the United Nations Security Council, may seek to re-engage as debates on regional security evolve. The European Union and the United Kingdom have also strengthened their strategic and economic engagement in the region. India, Japan, South Korea, Brazil and other countries also have growing interests in the stability of the Gulf.

The diplomatic response to Iran’s attack on member states of the Gulf Cooperation Council has been global — notably with UN Security Council Resolution 2817 demanding that Iran cease its attacks, which was co-sponsored by 135 countries. This resolution was paving the way for a global response that began to manifest itself in discussions aimed at forming an alliance or consortium to maintain freedom of navigation in the Strait of Hormuz.

The war has highlighted just how closely the security and stability of the Gulf are linked to global strategic interests: any future regional framework will almost certainly involve external actors whose economic and military presence in the region is already deeply entrenched.

Such frameworks could resemble initiatives similar to the global coalition in the war on terror — which would exacerbate military polarization in the region and lock both sides of the Gulf into long-term animosity that will almost certainly lead to further instability, chaos and global repercussions.

What the war has highlighted is not merely military vulnerability: it has revealed the limits of deterrence and diplomacy, as well as the fragility of food supplies, water desalination systems, airspace, maritime transport, logistics, digital infrastructure, banking reliability and tourism. A diplomatic resolution to the conflict could lay the foundations for an inclusive, realistic security framework rooted in regional cooperation. The first step, however, is to better understand the ends, not the means.

Ends Not Means

Previous proposals for dialogue, cooperation and regional security have all been rejected as insufficient.

Iran had proposed the “Hormuz Peace Endeavor.” Russia has repeatedly reiterated its idea of collective security. China has put forward the idea of transforming the region into an “oasis of security.” The Gulf Cooperation Council itself had presented the “GCC Vision for Regional Security in 2024,” which remains to this day the most comprehensive framework for cooperation in the region. Whilst none of these proposals attracted sufficient interest at the time, they all reflected a recognition that the existing order was inadequate. There has never been a serious collective effort to replace it. War now demands a change of course.

Before any meaningful de-escalation can take place, a new frame of reference will need to be established. Yesterday’s red lines have now been crossed and the region needs a collective vision of security that is not based on political consensus, but on overlapping national interests.

Without this, any de-escalation or diplomatic resolution of the conflict will merely delay the resurgence of tensions or war, without resolving the problems that have now resurfaced.

Deterrence will not be solely military in nature. It must be based on a network of interests that constitute lifelines for the region and on the realization that these — like the Strait of Hormuz — are also vital arteries for the entire world.

Amidst the barrage of missiles and drones, it was difficult to see these discussions making progress today. But ultimately, the means matter little: only the ends should guide our path towards the future.

Mehran Haghirian is the Director of Research and Programs at the Bourse & Bazaar Foundation. His upcoming book, Differentiating Foreign Policy Strategies in the Persian Gulf: The Decision-Making Calculus towards Iran, will be published by Springer in 2027.

Mohammed Baharoon is the director general of Dubai Public Policy Research Center (b’huth) in Dubai. He is also a founding member of the board of the Bussola Institute, a think tank in Brussels that focuses on the changing and emerging aspects of the partnership between the European Union and the Gulf Cooperation Council member states.

Section: (integrated-futures-initiative) Photo: Canva

By Mehran Haghirian and Abdullah Baabood

The Strait of Hormuz has always mattered, but rarely has that been as visible as it is today. For centuries, it has linked the Gulf to wider trading routes across Asia, Africa, and Europe. Today, a significant share of the world’s energy supplies and other commodities pass through this narrow stretch of water. When Hormuz is disrupted, the effects are not regional, but global, and they are felt quickly. It is for this reason that U.S. President Donald Trump has threatened to send Iran back to “stone ages” if it does not reopen the Strait.

What began as a military escalation between the United States, Israel, and Iran on February 28 is now spilling into the infrastructure that sustains global connectivity. Shipping routes are under pressure, insurance costs are rising, and commercial operators are hesitating. The Strait has not been formally closed, but it is no longer functioning normally. That distinction matters less than it once did. In practical terms, constraint can be as disruptive as closure.

Against this backdrop, recent talks between Iran and Oman are significant. As the Strait falls in shared Iranian and Omani waters, officials from both sides have met to discuss how to ensure the continued passage of vessels under current conditions. On the surface, this may appear as crisis management and an attempt to keep traffic moving and prevent further escalation. But it also raises a more fundamental question of who gets to shape the rules of access to one of the world’s most important waterways?

The talks with Iran are consistent with that approach. Oman is trying to reduce risk, keep communications open, and prevent escalation from spiraling further. But there are limits to what it can or will support. Oman’s interests are tied to the uninterrupted functioning of the Strait. Its economy depends on it. Its regional relationships depend on it. Its diplomatic credibility depends on it. Any arrangement that conditions or politicizes passage would put all of that at risk. Engagement, in this context, should not be mistaken for endorsement.

Tehran is exploring ways to exert greater control over transit, whether through coordination mechanisms, selective passage, or other forms of informal regulation. Even if presented as technical or temporary measures, such ideas carry wider implications. They suggest an Iranian attempt, however tentative, to redefine how the Strait operates for seven other countries who depend on it as well as the entire international community who relies on it.

But that is where the problem lies. The Strait of Hormuz is not something that can be reorganized through bilateral understandings, even between actors as central as Iran and Oman. It is, in every meaningful sense, an international waterway. Its openness is not just a legal principle; it is a practical necessity for the functioning of the global economy. Energy flows, supply chains, shipping networks, and financial systems all converge at this narrow point.

That reality places clear limits on what any one country, or even a small group of countries, can do. Efforts to impose new conditions on passage, whether formal or informal, are unlikely to hold. The number of stakeholders is simply too large, and their interests too deeply embedded. From Asian energy importers to European industries, the costs of disruption extend far beyond the Gulf. This is not a regional issue that can be managed quietly. It is a systemic one that inevitably draws in wider attention.

Diplomatic activity is picking up at the United Nations and by global leaders as conversations about maritime security are expanding beyond the region. Bahrain’s resolution demanding an end to Iranian actions in the Strait was co-sponsored by 135 countries. While another resolution was vetoed by China and Russia at the Security Council, there is a growing, if still cautious, recognition that freedom of navigation in the Strait cannot be left exposed to prolonged uncertainty or unilateral pressure.

Iran itself seemed to acknowledge this logic not long ago. In 2019, it proposed the Hormuz Peace Endeavor (HOPE), which rested on the idea that stability in the Strait requires collective responsibility. Its current actions are moving in the opposite direction.

This kind of ambiguity can be useful in the short term. It creates leverage without forcing a decisive confrontation. But it is not stable. Markets do not adapt well to prolonged uncertainty, and neither do supply chains. Over time, pressure builds-for clarity, for predictability, and ultimately for intervention.

The Strait of Hormuz is not something that can be reorganized through bilateral understandings, even between actors as central as Iran and Oman. It is, in every meaningful sense, an international waterway.

This is where Oman’s role becomes particularly important. Muscat has long positioned itself as a mediator with open channels to Iran while remaining closely connected to its GCC partners and the broader international community. Its approach is often described as neutral, but that can be misleading. It is not neutrality for its own sake; it is a strategy aimed at preserving stability in a difficult and unstable environment.

There is also a longer historical thread here. During the Iran-Iraq War, when tanker routes in the Gulf were under direct threat, Oman resisted efforts to frame regional security in purely confrontational terms. Sultan Qaboos understood that stability required coexistence, even among adversaries. During the Iran-Iraq War in 1984, Sultan Qaboos argued that “here in Muscat we do not believe it to be in the interest of security in the Gulf that Iran feels we intend to establish an Arab military pact that will always be hostile to it, or that we are about to form a joint force, whose main task is to fight Iran.” He further added that “there is no alternative to peaceful coexistence between Arabs and Persians in the end, and there is no alternative to a minimum of accord in the region.” That insight still holds.

Yet the current trajectory risks moving in a different direction. By raising the cost and risk of passage through Hormuz, Iran may be seeking to deter external involvement. In practice, it could have the opposite effect. The more the Strait becomes a source of sustained disruption, the more likely it is to attract broader international engagement and intervention. What begins as a regional pressure tactic can quickly become a global concern.

For the Gulf states, the implications are equally significant. Their preference for de-escalation and economic transformation is harder to sustain if their primary economic lifeline is directly threatened. At some point, restraint stops looking like prudence and starts looking like exposure.

That is the strategic paradox. Iran’s approach is designed to increase leverage but it risks triggering the internationalization of the conflict beyond control. Efforts to change the status quo and access to the Strait may ultimately lead to greater external involvement, be it through maritime coordination, naval presence, or more direct measures.

The Strait of Hormuz is too central to the global system to remain in prolonged uncertainty. It will remain an international waterway not simply because of legal norms, but because the world cannot function without it. The real question is how far the current disruption is allowed to go before that reality is enforced, and what the region looks like by the time that point is reached.

Mehran Haghirian is the Director of Research and Programs at the Bourse & Bazaar Foundation. His upcoming book, Differentiating Foreign Policy Strategies in the Persian Gulf: The Decision-Making Calculus towards Iran, will be published by Springer in 2027.

Abdullah Baabood is an Omani academic currently serving as the Chair of the State of Qatar for Islamic Area Studies at Waseda University, Tokyo, Japan.

Section: (integrated-futures-initiative) Photo: Canva

By Esfandyar Batmanghelidj

Few aspects of the ongoing war have rankled the international community more than the fact that Iran is charging vessels a fee for safe passage through the Strait of Hormuz. Now, Iran has insisted that it will retain “control” of the strait even after the end of the war.

Understanding this demand requires precision about what is meant by “control.” After this war ends, Iran will still be able to threaten to commercial vessels passing through the Persian Gulf. The asymmetric capabilities it has used to project this threat—ballistic missiles, cruise missiles, naval mines, and aerial and naval drones—will remain. There is no credible military solution to eliminate these capabilities, especially considering that even sporadic success striking ships can shift the risk appetite of vessel owners and charterers.

But even if Iran retains the capacity to strike vessels in the Persian Gulf after the war ends, it will not be able to unilaterally impose a toll on maritime traffic passing through the Strait of Hormuz. This is because Iran can only credibly threaten vessels while a war is ongoing. Once a ceasefire is agreed, any decision to strike vessels would constitute a violation of the ceasefire, triggering renewed conflict. In this sense, Iran’s present control of the strait does not reflect its latent capability to strike vessels, but rather its willingness to absorb the costs associated with the retaliation for those strikes. Those costs remain enormous—it is precisely because of the destructive nature of this war that Iran continues to signal an openness to diplomacy.

The notion that Iran will continue to control physically the Strait of Hormuz after the war can be rejected on face. But as governments around the world seek a diplomatic solution to end this war, they should be careful not to reject the Iranian demand for a “Hormuz toll” outright. Iran’s insistence on continued control of the strait is a political condition for a ceasefire, one advanced in light of the bruising reality that Iran failed to deter unprecedented attacks and has at best managed to draw the United States and Israeli into an attritional war. If a ceasefire requires that both Iran and the United States find a way to claim victory in a war with no winners, accommodating political demands in creative ways is tremendously important. Here, the creation of a toll represents a possible technical provision for a deal, one that can help create political buy-in for a ceasefire and follow-on agreement among leaders in Tehran.

To understand the potential utility of a formal toll mechanism, it is important to note the existing precedent for such fees and the possibility that Iranian control of the strait could be non-exclusive, meaning the toll mechanism could include other regional countries.

Turkish Precedent

The Strait of Hormuz is just over 30 kilometers wide at its narrowest point, meaning that it straddles Iranian and Omani territorial waters. Under the United Nations Convention on the Law of the Sea (UNCLOS), the strait must remain open for international shipping. Specifically, Article 26 of the convention specifies that “no charge may be levied upon foreign ships by reason only of their passage through the territorial sea.” In this sense, an Iranian “tollbooth” on the Strait of Hormuz would be inconsistent with international law.

But Article 26 does note that “charges may be levied upon a foreign ship passing through the territorial sea as payment only for specific services rendered to the ship.” This clause has generally been interpreted to mean that countries can charge fees on vessels passing through its territorial waters for services related to navigational safety.

The notion that Iran will continue to control the Strait of Hormuz can be rejected on face. But as governments around the world seek a diplomatic solution to end this war, they should be careful not to reject the Iranian demand for a “Hormuz toll” outright.

Turkiye is one such country. Turkish authorities impose a fee, adjusted every July, for vessels passing between the Black Sea and the Mediterranean. Currently, the fee is just under $6 per net ton of cargo, meaning that a major container ship transiting the Bosporus is likely paying around $200,000 in fees. Turkiye earns around $200 million in such fees annually. The recent increase in fees was justified “in terms of supporting the sustainability of the public services” provided by Turkiye’s Directorate General for Maritime Affairs.

Notably, if an equivalent fee were applied to the much larger VLCC tankers that pass through the Strait of Hormuz, the revenue would total more than $500,000 per vessel. This charge is not orders of magnitude beyond what Iran is currently charging vessels for safe passage through the strait, indicating that commercial operators can reasonably absorb the cost of the proposed toll, even in peacetime.

Turkiye’s original imposition of fees was contested and if either Iran and Oman were to try to unilaterally adopt a similar model there would be significant pushback, especially from the other littoral states of the Persian Gulf. But the international community does accept Iran’s right to charge fees in a context broadly similar to maritime trade—global aviation.

Aviation Parallel

Iran has not ratified UNCLOS, but it is a party to a similar piece of international law, the Convention on International Civil Aviation, also known as the Chicago Convention. In line with this convention, Iran charges overflight fees from global airlines that use its airspace.

Importantly, much like UNCLOS, the Chicago Convention makes clear that charges cannot be levied on aircraft “in respect solely of the right of transit.” However, Article 15 of the convention does allow fees to offset to costs of critical services related to aviation safety, such as maintaining civilian radars to monitor weather, providing air traffic control to manage flight paths, and ensuring adequate emergency response services at airports.

Given the precedent set by the fees Turkiye charges for vessels passing through the Turkish Straits, and the precedent represented by the overflight fees Iran already charges in line with its provision of air traffic control, navigation and safety services, the Iranian demand to formalize a transit surcharge is neither inherently unreasonable or nefarious. The international community has long accepted Iran’s imposition of such fees for use of its airspace and has understood the need to maintain the safety and openness of Iranian airspace for the benefit of international travel and air freight.

Of course, the fact that Iran is able to charge overflight fees does not mean that it is in a position to impose such fees on vessels transiting the Strait of Hormuz. No regional country will agree to exclusive Iranian control over the strait, even if that control takes the bureaucratic form of a payment. To overcome resistance to their political demand, Iranian authorities must accept that the technical implementation of the toll mechanism will only be viable if it reflects a shared control over the strait.

Regional Diplomacy

The formalization of a kind of toll could contribute to the rehabilitation of regional diplomacy after the war. If Iran is to benefit financially from the passage of vessels through the strait, so too should Oman, whose territorial waters encompass the passage. Moreover, the other six countries who shores bound the Persian Gulf should also benefit—it is their trade that underpins the vessel traffic. In this respect, regionalization of a “Hormuz toll” is consistent with the creation of a more integrated region which shares responsibility for the security and safety of maritime trade.

Importantly, there already exists a body that could be repurposed to receive and use the toll revenue in a regional format. Established in 1978, the Regional Organization for the Protection of the Marine Environment (ROPME) is the only active regional body that includes all eight littoral states of the Persian Gulf. While mainly focused on environmental issues, rather than maritime safety, the organization has successfully coordinated regional responses to maritime emergencies, such as oil spills.

ROPME is long overdue revitalization, especially as climate pressures accelerate degradation of the Persian Gulf’s fragile ecosystems. In an analysis for the Bourse & Bazaar Foundation published last year, Javad Amin-Mansour and Mohammad Al-Saidi noted that “ROPME requires stronger technical capacity, enhanced decision-making structures, and sustained political and financial backing from its members.” The financial boost from a modest fee could revitalize this body, allow it to expand its remit to providing a wider range of environmental and safety-related services in the Persian Gulf and Gulf of Oman. Given the environmental impact of American attacks on Iranian naval ships and Iranian attacks on commercial vessels, the use of toll revenues to remediate the damage of war represents a genuine need.

Establishing a durable peace after this war will require creative thinking. All of the parties involved in the conflict will make political demands. Those demands should be viewed as openings, not dealbreakers, especially when they can be connected to potential technical provisions for a diplomatic agreement.

If the Iranian demand to maintain control of the Strait of Hormuz can be translated into a specific toll mechanism, which can in turn be regionalized and connected to the shared task of rebuilding in the wake of the war, it may prove a valuable opening to create a more integrated and equitable region.

Esfandyar Batmanghelidj is the Founder and CEO of the Bourse & Bazaar Foundation.

Section: (integrated-futures-initiative) Photo: Canva

By Zeynab Malakouti and Mohammad Eslami

It appears we are on the verge of a new phase in the U.S.-Israeli war against Iran—one that could include ground troops deployed to Iranian islands or nuclear sites. Yet, with the war entering its second month, voices inside the U.S. administration, as well as regional and international leaders, are calling for negotiations. The Iran war is likely to end only when all parties can present the outcome as a form of victory. In this sense, a settlement will require that the parties in the conflict make reasonable concessions that can be viewed as “achievements” for the other side.

What is needed is a “win-win” outcome, or, more precisely, a situation in which neither the U.S. nor Iran is cast as a loser. Therefore, it is necessary to facilitate genuine diplomacy, rather than the maximalist approaches that would make a resolution far more difficult. Such a framework would need to differ from the recent failed attempts, both the Joint Comprehensive Plan of Action (JCPOA) and the diplomatic process of the past year which ended in Geneva talks just prior to the current war.

Underlying any serious discussion of a durable diplomatic settlement is a reality that military power alone cannot alter: the core disputes between Iran, the U.S., and Israel have no sustainable military resolution. Military operations, however precise or overwhelming, incur unacceptable costs and casualties while leaving the fundamental grievances unresolved. In the absence of a diplomatic framework, the cycle of escalation will inevitably continue.

Solving the Nuclear Dilemma

Even though President Donald Trump previously claimed, following the 12-Day War, that Iran’s nuclear capabilities had been “obliterated,” recent strikes on nuclear sites suggest that this was not entirely the case. For the U.S. and Israel, a central objective continues to be the complete dismantlement of Iran’s nuclear program.

It is unclear if Iran’s new Supreme Leader, Ayatollah Mojtaba Khamenei, will continue to adhere to the fatwa issued by his father, Ayatollah Ali Khamenei, which prohibits nuclear weapons. But if this position is stated clearly, if monitoring and verification return, and if Iran is granted the right to maintain a peaceful civilian nuclear program under strict limitations, a compromise can be found.

In practice, although Iran possesses the technical expertise, most of its key nuclear facilities have been targeted or degraded. These include important sites such as in Natanz, Isfahan, and Fordow, as well as the yellowcake production facility in Ardakan, which processes uranium ore in the early stages of the fuel cycle, and the heavy-water reactor in Arak.

A potential agreement could involve the destruction or strict limitation of key nuclear facilities, along with a decision regarding Iran’s stockpile of enriched uranium, estimated at around 400 kilograms, which could be transferred, reduced, or placed under international supervision. In such a scenario, the U.S. and Israel could declare victory by claiming that Iran’s nuclear program has been effectively neutralized.

On the other hand, Iran’s insistence on maintaining its right to research, produce, and use nuclear energy for peaceful purposes under Article IV of the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) is politically significant for domestic audiences, as the state has spent over two decades and billions of dollars to frame nuclear energy as a sovereign right of the Iranian people. Recently, a fast-track bill has been proposed in the parliament, including three key measures: withdrawal from the NPT, the repeal of legislation governing Iran’s commitments under the nuclear deal, and support for a new international framework with aligned countries for the development of peaceful nuclear technology. If adopted, this would signal that a future agreement is unlikely in practice, as Iran may be moving toward a policy that keeps the option of nuclear weapons open.

The foundational premise of any diplomatic settlement in this war is that the Trump administration must come to terms with a reality that has long been evident: the decades-old nuclear dispute with Iran has no military solution.

However, the underlying concern persists; the issue of uranium enrichment itself. Iran retains the technical capacity to increase enrichment levels if it perceives an existential threat. Consequently, Americans and Israelis are aware that allowing Iran to maintain uranium enrichment at levels of 3–5 percent for civilian purposes could facilitate a relatively rapid escalation to higher enrichment levels.

One possible solution would be the establishment of a multinational uranium enrichment consortium under the supervision of the International Atomic Energy Agency (IAEA), involving Saudi Arabia, the United Arab Emirates, and European countries. However, a key point of contention is that Iran has insisted on hosting such a consortium within its territory, while others might strongly oppose this option. But given that the destruction of uranium enrichment facilities during the 12-Day War and the recent conflict has been extensive, Iran could accept a middle-ground approach, whereby the uranium enrichment cycle and nuclear fuel production are geographically distributed across the region, rather than concentrated within a single state.

In this scenario, the further repudiation of nuclear ambitions could reduce the perception of an existential threat and create space for more stable regional relations. However, Iran’s relations with the countries of the Gulf Cooperation Council require significant revision and rebuilding, as the current war shows that, for the moment, Iran is perceived as a profound threat by its Arab neighbors.

The foundational premise of any diplomatic settlement in this war is that the Trump administration must come to terms with a reality that has long been evident: the decades-old nuclear dispute with Iran has no military solution.

Sanctions Relief

If a minimal agreement were reached on Iran’s nuclear program, the primary demand on the Iranian side would be the lifting of sanctions. The maximalist approach, as reflected in the 15-point US proposal reportedly shared with Iran, suggests that if U.S. demands are fully met, the outcome would be comprehensive sanctions relief. However, this proposal has been rejected by Iran. More pragmatically, defining the minimum requirements for both sides is therefore essential to reaching an agreement. If the U.S. fails to extract maximal concessions from Iran, any sanctions relief would likely need to remain partial and exclude measures related to human rights violations and support for terrorism. In this context, relief could initially take the form of limited measures, such as waivers for the purchase of Iranian oil, as occurred during the war when the US waived sanctions on Iranian oil purchases at sea for 30 days, or controlled access to frozen assets, particularly for the reconstruction of the energy sector.

For Iran, especially in the aftermath of the war and given the scale of destruction, the situation is different. Although military strikes have significantly degraded Iran’s nuclear infrastructure, Iran has not entirely lost its bargaining leverage, as it retains technical expertise, residual capabilities, and a stockpile of approximately 400 kilograms of enriched uranium, the status and location of which remain uncertain. If Iran were to concede this remaining leverage—namely, its nuclear program and enrichment capacity—it would require sanctions relief substantial enough to generate meaningful economic recovery. This would be necessary not only for rebuilding its economic infrastructure, but also for demonstrating domestically that the costs of war and nuclear concessions have resulted in a fair and equitable outcome, namely, the preservation of a peaceful nuclear program alongside the lifting of sanctions. However, the perceived level of fairness will ultimately depend on several factors, such as whether sanctions relief is partial or comprehensive, and the outcome of the war

Regarding sanctions relief, several key dimensions require further analysis, including the sectors targeted, the duration of relief, and whether primary and secondary sanctions are included. These elements depend on two critical factors, which are not clear at this moment: first, how the war ends; and second, the extent to which Iran’s economic capacity contributes to the survival of the Islamic Republic, particularly in maintaining domestic stability and sustaining elite and societal support.

For European stakeholders, this suggests a strategic choice. Instruments such as the snapback mechanism confer influence primarily in moments of confrontation, not in periods of stability. This was evident in October 2025, when all previously lifted UN sanctions on Iran under six UN Security Council resolutions were reimposed through the snapback mechanism following a decision by France, Germany, and the United Kingdom.

If the United Kingdom, France, and their European partners seek to play a constructive role in a post-conflict order, they must be prepared to relinquish tools designed for pressure in favor of those designed for peace. The greater strategic reward lies not in preserving leverage for the next crisis, but in helping to build a settlement that makes such crises obsolete. In this context, Iran’s experience with the snapback mechanism is likely to make it strongly resistant to the inclusion of any comparable automatic enforcement mechanism in future agreements.

Range Limits

The missile program remains one of the most challenging aspects of any potential agreement. Iran has consistently stated that its missile capabilities are non-negotiable and remain off the table. In practice, since the early 2000s, missiles have been Iran’s primary area of military investment. This war has reinforced Iran’s perceptions. Iran’s air defense systems have shown clear limitations, meaning that, in military terms, Iran relies heavily on missiles and relatively low-cost drones for deterrence, self-defense, and offense.

From Iran’s perspective, any substantial reduction in its missile capabilities—whether in terms of quantity or range—would directly increase its vulnerability in future conflicts. As a result, this is an area where Tehran is unlikely to make major concessions. Without some form of accommodation on this issue, reaching a comprehensive agreement will remain extremely difficult.

Yet, if a realistic compromise is to be found, it must begin with an honest assessment of Iranian threat perceptions. The range of missiles Iran develops is not arbitrary; it is shaped by the distance of the threats Tehran perceives. If Iran chooses to escalate, two broad trajectories are conceivable after the war: Iran could choose to expand its missile capabilities toward a range of 4,000 kilometers or push further to 7,000 kilometers. What it will most likely not do, however, is abandon its shorter-range 2,000-kilometer missiles, and it is unlikely for it to negotiate the size of its stockpile.

That said, Iran may be open to restraint on longer-range development, depending on how it assesses the posture of European powers. The calculus is straightforward: the more Europe distances itself from direct collaboration with the U.S. and Israel in the current conflict, and the more it uses its leverage at the UN Security Council to facilitate sanctions relief and endorse a resolution that could serve as a political guarantee for a non-aggression framework, the more Tehran may be willing to cap its missile range at 2,000 kilometers.

None of these elements exist in isolation. The missile issue, the nuclear file, sanctions relief, and the future security architecture in the Strait of Hormuz are all tightly interlinked. Iran will approach them as a single, interconnected package. If Europe plays a constructive role—both in securing a ceasefire and in shaping a post-war security structure—it may find that Tehran is prepared to trade long-range missile ambition for strategic reassurance. Without such guarantees, however, the incentive to expand range and capability will only grow.

Opening the Strait

The Strait of Hormuz is will emerge as a central issue in any negotiations, largely because its strategic importance had long been underestimated. In a conflict of the scale launched by the U.S. and Israel, military force alone is not decisive; states also rely on geographic and economic leverage to avoid defeat. For Iran, the Strait precisely represents such leverage. Its ability to influence—and, at critical moments, potentially control—this narrow waterway is a significant strategic asset.

By imposing restrictions on maritime traffic through the projection of threat, Iran can impact global supply chains extending far beyond energy, and touching food production and semiconductor industries, thereby internationalizing the conflict. If Tehran maintains sustained pressure in the Strait, it can prevent the war from settling into a prolonged stalemate of the kind seen in other conflicts, such as Ukraine. For this reason, Iran is likely to increase its investment in securing and projecting power in the area, whether through transit regulations or other forms of oversight.

For the US and Israel, by contrast, the Strait is a critical vulnerability, particularly in their global relations. Both are therefore likely to prioritize maintaining freedom of navigation and limiting Iran’s ability to exert control over this global chokepoint.

A realistic, win-win approach to this dilemma would require Iran to offer a new framework for the Strait of Hormuz—one that reflects the reality that the waterway must remain international.

For instance, one proposal is to establish a joint Oman–Iran mechanism to operate a formal tollbooth. In practice, Iran has already begun to impose transit fees analogous to those Egypt collects for passage through the Suez Canal, and it is likely to continue doing so. Key nations—including China, Russia, Iraq, Turkey, Thailand, Pakistan, and India—have already secured passage.

The strategic choice would be between engaging in a prolonged conflict with Iran or securing economic stability and addressing the energy insecurity caused by closure of the Strait. In this scenario, affected countries must weigh which option better serves their interests. An alternative scenario would be for Iran to accept the principle of freedom of navigation in the Strait of Hormuz, while retaining primary responsibility for the security of the Strait as a form of deterrence against potential threats.

Ultimately, military force is no more viable a solution to the closure of the Strait of Hormuz that to other issues complicated relations between the U.S. and Iran. The risks of a military operation—strategic, tactical, logistical, technical, and human—are immense and defy easy calculation. Inside the White House and the Pentagon, ideas are circulating about a ground invasion of Kharg Island, Abu Musa, the Greater Tonb and Lesser Tonb as well as and other Iranian islands—a move that would bring bloodshed to all sides. However, the most significant risk is political: an operation of this kind would close the window for both Trump and Iran to claim victory and extricate themselves from a potentially endless war.

Overturning the Old Order

As Antonio Gramsci once wrote, “the old is dying and the new cannot be born.” This is precisely the condition of the Persian Gulf today. The American-led security order that once anchored the region is collapsing, but no viable alternative has yet emerged to take its place. In this interregnum—this void between orders—a great variety of morbid symptoms appear: reckless wars, shifting allegiances such as the relations between the U.S. with the EU, the UK, and the NATO, and a dangerous vacuum.

Yet committing to diplomacy requires acknowledging that when you overturn the old order, a new one will inevitably take its place—whether by design or by default. The question is not whether a new order will emerge, but whether it will be born out of continued conflict or constructed through mutual agreement. However, any emerging order must remain firmly grounded in international law, with consistent respect for core principles such as bona fides, non-intervention, and the prohibition of the use of force.

The U.S. is locked in an attritional war. So far, Iran has demonstrated its ability to withstand sustained military pressure and retains the capacity to generate regional instability by targeting U.S. interests and leveraging its influence over the Strait of Hormuz. This, in turn, enables Iran to exert pressure on global energy markets, contributing to higher oil and gas prices and creating broader energy insecurity from Europe to Asia. Depending on how the war ends, Iran’s relations with key stakeholders will require revision and rebuilding.

Considering all the challenges outlined above, one thing remains clear: where there’s a will, there’s a way. If President Trump truly wants to stop the war he set in motion—a war that has created chaos for allies across the Middle East, Europe, and Asia—the door is always open for talks. But the deployment of roughly 17,000 troops to the region suggests that Trump is not yet serious about committing to diplomacy. For now, he is continuing to put lives and livelihoods at risk.

Zeynab Malakouti is a Senior Fellow at the Global Peace Institute and a Research Affiliate at the Middle East Institute, National University of Singapore.

Mohammad Eslami is a PhD Candidate and Research Fellow at the University of Tehran. He is a co-author of The Second Europe, a study of Iranian-European nuclear negotiations and was formerly editor-in-chief of Khorasan Diplomatic Magazine, traveling regularly with Iranian negotiators during the nuclear talks.

Section: (vision-iran-initiative) Photo: WANA

By Mehran Haghirian

The war unfolding now in the Persian Gulf has produced something more dire than just another episode of escalation between Iran and its Arab neighbors. It has created a rupture. For years, the region has lived through tensions, proxy confrontations, maritime incidents, sanctions, and diplomatic breakdowns without crossing into this kind of direct and sustained assault across the Gulf itself. That threshold has now been crossed. Aside from the collapse of the security architecture of the region, this is a rupture in how Iran is understood across the Gulf, and it will shape perceptions for years to come.

The Islamic Republic made the decision to turn the Gulf into a theater of war. This was not an improvised move. For more than three decades, it was understood that if Tehran faced what it perceived to be an existential threat, it might seek to set the Gulf on fire. The scenario was long contemplated, widely predicted, and yet rarely treated as probable. It is now the reality from which the region must begin to think about its future. Across much of the Gulf, Iran is now the “betrayer,” an “enemy,” and a “terrorist” state.

The region has experienced three Gulf wars in recent decades, but none came close to igniting all eight littoral shores simultaneously. Within hours of the escalation, the Islamic Republic attacked five of the six members of the Gulf Cooperation Council (GCC): Bahrain, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). By the second day, Oman had also been targeted. Cruise missiles, ballistic missiles, and drones struck across the region. Debris from intercepted missiles has fallen into residential neighborhoods. Civilian casualties have been recorded across Iran, Israel, Iraq, Kuwait, Bahrain, the UAE, and Oman.

Bitter Memories

Politically, the shock has been profound. Resentment toward Tehran is now visible in Gulf capitals and among the public. Memories of earlier attacks remain vivid. In 2016, scenes of Iranians storming the Saudi diplomatic facilities in Tehran and Mashhad. In 2019, tankers off the UAE coast were struck by limpet mines widely attributed to Iran. Later that year, drones and missiles attacked Saudi Aramco facilities at Abqaiq and Khurais. In January 2022, Houthi drones struck Abu Dhabi and Dubai, killing three people. None of those incidents, however, come close to the level of threat, shock, and anger generated by the present war. Leaders, citizens, and residents across the GCC are unlikely to forget the scenes of missiles over their cities, and the attacker.

Some GCC states, particularly Saudi Arabia, the UAE, and Bahrain, opposed the 2015 nuclear agreement between Iran and world powers largely because they feared an empowered Iran with closer ties to Washington. Those same countries were the primary supporters of Trump’s withdrawal from the agreement in 2018. The region’s calculus began to shift in 2021, after Gulf states were confronted more directly with the risks posed by the Islamic Republic and shifted strategy to contain it with diplomacy.

Despite tensions, the region moved toward dialogue. Gulf leaders pragmatically concluded that Iran could not simply be isolated and therefore had to be engaged. Oman has never severed ties with Iran. Qatar enhanced relations with Tehran as the 2017 blockade was imposed on it by some of the GCC states. Backchannel talks between Saudi Arabia and Iran continued for years before culminating in the 2023 rapprochement. The UAE and Kuwait also moved to reinstate diplomatic ties in 2022. Bahrain was about to finalize a détente with the Islamic Republic prior to the June 2025 war. What has now collapsed is not diplomacy itself, but the assumption that Gulf states might choose to engage Iran, even while it projects a threat.

Gulf reactions to the war would have been far more reactionary and extreme had there not been substantive and successful diplomacy in the preceding years. Gulf capitals remain cautious about allowing the war to expand further.

Gulf reactions to the war would have been far more reactionary and extreme had there not been substantive and successful diplomacy in the preceding years. Gulf capitals remain cautious about allowing the war to expand further. The region’s leaders understand that escalation will complicate efforts to restore stability in the region while maintaining a viable relationship with Iran. Even so, there are reports that the leaders of the UAE and Saudi Arabia are “pressing Trump in regular phone conversations to finish the job and destroy Iran’s military capabilities before moving on.” The UAE’s ambassador to Washington wrote in the Wall Street Journal that the international community “can’t let Iran hold the U.S., the UAE and the global economy hostage. A simple cease-fire is not enough.” On March 23, Bahrain drafted a UN resolution that would authorize the use of force to open the Strait of Hormuz.

Before the war, Saudi Foreign Minister Prince Faisal bin Farhan had emphasized the goal of closing the chapter of tensions with Iran. That chapter has now been reopened. Publicly, Gulf states remain cautious about aligning with Israel, despite the expansion of ties under the Abraham Accords and the dynamics that led to the current war. At the same time, overwhelming dependence on the U.S. has pushed several GCC states toward a degree of practical coordination that may deepen after the war.

Saudi Arabia, Qatar, and the UAE have downgraded diplomatic relations with Iran by expelling the military attaché and reducing embassy staff, though none have severed ties entirely. Qatar has arrested ten suspects linked to an Islamic Revolutionary Guards Corps cell operating in Doha, while the UAE has also detained individuals with links to the IRGC and Hezbollah. The UAE closed the Iranian hospital, university, school, and social club, and is considering freezing billions of dollars of Iranian assets, one of the few remaining channels through which Iran has access to foreign currency.

Durable Ties

However, the rupture is not yet permanent. Transnational ties, trade routes, migration patterns, family relations, and business networks that have connected Iran and the Arab states for decades, if not centuries, remain intact. They have been disrupted, in some cases severely, but they continue to exist beneath the level of interstate conflict. The Gulf remains a shared Arab-Iranian space.

An awareness of this shared space is reflected in the recognition among Gulf leaderships that a prolonged state of conflict is incompatible with their economic agendas and national visions. The shift toward diplomacy over the past five years was tied to a broader understanding that stability is a prerequisite for growth, investment, and long-term transformation. That calculation has not disappeared because of the war.

The war has also unfolded alongside a profound transformation inside Iran itself. The succession following the death of Ali Khamenei and the rise of his son, Mojtaba, have reopened longstanding questions about the legitimacy and future of the Islamic Republic. Whether the system consolidates or collapses, this moment will shape how Iran approaches the region, and how regional countries approach Iran, in the years ahead.

The trust deficit is no longer confined to governments. It now sits with the public. Across the Gulf, people watched missiles cross their skies, saw debris fall into their neighborhoods, and witnessed civilians killed in cities they consider among the safest in the world. That memory will not fade quickly, and it will shape how Iran is seen across the region for years to come.

There is a real risk that the actions of the Islamic Republic become indistinguishable, in the public imagination, from Iran itself. There is a recognition in the Gulf—sometimes explicit, sometimes implied—that what is unfolding is the result of decisions taken by a state that has long been disconnected from its own population. That distinction leaves open a narrow but important space for something other than complete breakdown. If the distinction collapses, the rupture created by this war will harden into something far more durable, making any future attempt at rebuilding relations significantly more difficult.

The Gulf’s relations with Iran have been ruptured and cannot be restored quickly. But the question is whether the underlying connections that have historically linked Iran and its Arab neighbors can endure long enough to serve as the basis for a new regional order. What survives after the war may ultimately matter more than what has been broken.

Mehran Haghirian is the Director of Research and Programmes at the Bourse & Bazaar Foundation. His work centers on conflict resolution and diplomacy, with a particular focus on the Persian Gulf region. Haghirian holds a PhD in Gulf Studies from Qatar University and a master’s degree in International Affairs from American University’s School of International Service in Washington, D.C.

Photo: Wikicommons

By Shakhlo Kamaladinova

The war unfolding across the Persian Gulf is intensifying economic shocks far beyond the region by disrupting critical global systems, including energy chokepoints, shipping insurance markets, and aviation networks. For the countries of Central Asia, especially Uzbekistan and Kazakhstan, exposure to this shock is structural rather than geographic. As landlocked economies, both countries rely heavily on external transit systems. Evidence from UN trade and development analysis shows that landlocked countries face trade costs roughly 40% higher than coastal economies, largely due to dependence on cross-border infrastructure and transit corridors. Disruptions in the Gulf will hit Central Asia indirectly, by straining the transport, logistics, and energy networks on which the region’s external connectivity depends.

In early March, Kazakhstan’s Foreign Minister Yemek Kosherbayev convened a joint consultation with Central Asian and Azerbaijani counterparts, where ministers called for de-escalation and adherence to international law to maintain regional stability. The coordinated response reflects growing awareness that continued tensions could have broader implications for regional connectivity and economic activity.

Iran’s Southern Ports

Direct trade between Central Asia and the member states of the Gulf Cooperation Council (GCC) has expanded rapidly from a low base, but disruptions to this trade remain a secondary concern during the war. Total trade reached $3.3 billion in 2024—more than four times higher than in 2020—with Turkmenistan accounting for the largest share, followed by Uzbekistan and Kazakhstan. However, this relationship is highly concentrated, with the United Arab Emirates (UAE) accounting for around 97% of total Gulf–Central Asia trade.

The more pressing vulnerability facing Central Asia is its dependence on Iran as a transit hub. Although Iran represents only a small share of Central Asia’s trade in value terms, it provides critical access to seaports for the region’s landlocked economies. For example, Uzbekistan’s trade with Iran accounted for just 0.7 percent of its total trade turnover in 2025, indicating limited direct dependence. However, this understates Iran’s importance as a corridor through which trade with third markets is routed.

Uzbekistan and Kazakhstan have sought to increase southern connectivity. Uzbek officials have actively prioritised southern connectivity through Iran by advancing the Uzbekistan-Turkmenistan-Iran corridor, including agreements to establish joint logistics infrastructure at Chabahar Port and Bandar Abbas Port, alongside measures to reduce transit costs such as the mutual removal of freight truck entry fees in 2025 (previously around $400 per vehicle) .

These policy efforts are increasingly reflected in operational use: in 2024, a pilot multimodal route linking Indian ports to Uzbekistan via Bandar Abbas handled initial shipments of 20 containers over 2,673 km in around 20 days, demonstrating the viability of Iran as a transit corridor for third-country trade rather than merely a bilateral partner.

Corridor diversification is best understood as a portfolio strategy: the goal is not a single optimal route, but sufficient redundancy to prevent any one disruption from becoming a macroeconomic shock.

Likewise, last year Kazakh officials signaled plans to significantly expand trade with Iran and deepen logistical integration between Kazakh Caspian ports and Iranian port infrastructure, explicitly framing Iran as a gateway to wider markets.

Central Asian economic diplomacy has supported the development of the International North–South Transport Corridor (INSTC), which connects Central Asia to global markets via Iranian ports. The corridor is designed to link Eurasian rail and road networks with maritime routes in the Persian Gulf, offering an alternative to longer and more geopolitically constrained routes. Within this framework, the main Iranian port of Bandar Abbas serves as a gateway for accessing global markets, with smaller volumes of cargo passing through Iran’s other southern ports. This structure explains the region’s vulnerability to spillovers. The immediate effects of the war, such as rising insurance costs, reduced shipping activity, and disruptions to airspace, directly affect the maritime and logistical exit points on which these southern trade corridors depend.

Data compiled by the OECD suggests that the three main branches of the INSTC, which all pass through Iran’s southern ports, handle around 19 million tonnes of cargo annually, representing around 8 percent of the total cargo throughput available to Central Asia. Rerouting this trade through other corridors will prove challenging. The Trans-Caspian Transport Corridor which crosses the Caspian into Azerbaijan is running at full capacity. Increased use of the Northern Eurasian Corridor, which utilizes Russia’s rail network, will increase Central Asian strategic dependence on Russia, at least in the short-term.

Impact of Maritime Risk Pricing

The most immediate transmission channel from the Gulf war to Central Asia operates through maritime risk pricing. When shipping routes face credible security threats, costs rise sharply through higher war-risk premiums, insurance withdrawals, rerouting, and increased freight rates driven by vessel scarcity. War-risk premiums have surged: in some cases increasing more than tenfold, with coverage costs rising from roughly 0.25 percent to around 3 percent of vessel value—equivalent to several million dollars per voyage for large tankers.

For Central Asia, this repricing has three key economic implications, even though direct trade with the Gulf and Iran remains limited. First, transit costs increase even when goods are not destined for the Gulf. For exporters in Uzbekistan and Kazakhstan using Iranian routes to access global markets, the maritime segment becomes the main cost constraint. Higher insurance and freight costs feed back into the entire supply chain, raising overall logistics expenses and reducing export margins.

Second, reliability becomes a binding constraint. Disruptions at a major chokepoint reduce schedule predictability: vessels face delays, cargo misses connections, and firms are forced to either reroute shipments or hold larger inventories. These indirect costs can be as significant as the increase in freight rates, particularly for time-sensitive or perishable goods.

During the 12-Day War between Iran and Israel last June, the Uzbek presidential administration issued a statement noting that the war was “bound to impact Uzbekistan’s foreign economic relations and access to global markets” and that ongoing disruptions to key trade corridors “could increase transportation costs by up to 30 percent.”

Impacts on Aviation

A second spillover channel is aviation, which impacts both passenger connectivity and air cargo capacity. In early March, Uzbekistan temporarily suspended flights to several destinations, including the UAE, Qatar, Iran, Kuwait, and Saudi Arabia, while maintaining limited services primarily to repatriate citizens. Kazakhstan’s flagship carrier also experienced immediate disruptions, with flights cancelled, turned back, or diverted on routes such as Almaty–Dubai, Almaty–Doha, and Almaty–Medina.

For trade, the more material impact comes from the loss of air cargo capacity that typically moves through Gulf hubs and over Gulf airspace. A logistics intelligence briefing in March reported approximately 23,000 flight cancellations since late February, with global air cargo capacity declining by around 18% as of the week ending 8 March. In response, freight forwarders began chartering additional flights to compensate. The same analysis noted that a significant share of China-Europe air cargo normally transits the Middle East, and that nearly one-fifth of global air cargo is linked to the region through transit, origin, or destination flows.

For Central Asia, this capacity constraint has two main implications. First, it raises the landed cost and extends delivery times for high-value, time-sensitive imports, such as industrial components, electronics, pharmaceuticals, and specialized machinery that are typically transported by air during periods of supply chain stress. The result is not only higher freight costs but also increased production risk, as delays in critical inputs can disrupt manufacturing schedules.

Second, it interacts with labour mobility and remittance flows, particularly as Gulf labour markets expand recruitment from Central Asia. The Central Bank of the Republic of Uzbekistan reported remittance inflows reaching $18.9 billion in 2025, a 28 percent year-on-year increase, underscoring their importance for macroeconomic stability and foreign exchange balance. While traditional destinations remain dominant, Uzbekistan has been actively expanding labour migration partnerships with Gulf countries; for example, Saudi Arabia has announced plans to recruit at least 20,000 Uzbek workers under new agreements.

The implication is not that Gulf-linked remittances currently represent the largest share, but that aviation disruptions may become increasingly macro-relevant as migration corridors diversify. Disruptions to air travel can delay worker rotations, slow recruitment processes, and complicate family mobility, while also increasing the cost and friction of remittance transfers, particularly where cash-based channels are affected.

Mixed Picture in Energy

For Kazakhstan, higher oil prices provide short-term fiscal and external support. Oil accounts for over 50 percent of exports and a substantial share of fiscal revenues, meaning price increases can strengthen budget balances and foreign exchange inflows. However, these gains are not without risks. Prolonged volatility may also weaken investor confidence and heighten macroeconomic uncertainty.

Uzbekistan, by contrast, faces a more adverse impact. As a net importer of refined fuels and energy products, the country is directly exposed to rising global prices. Estimates suggest that Uzbekistan spends around $9 billion annually on food and energy imports (approximately 6 percent of GDP), and that each $10 increase in oil prices can raise import costs by $500–600 million. This translates into higher transportation and production costs, adding pressure to domestic inflation and complicating monetary policy.

Urgency of Corridor Diversification

A central insight from the current crisis is that connectivity strategy has effectively become macro-stabilization policy. For landlocked states, diversification across transport corridors is analogous to diversification across export commodities: it reduces exposure to a single external point of failure.

In this context, the Trans-Caspian International Transport Route (also known as the “Middle Corridor”) has gained renewed importance. Its recent growth is measurable as in the first 11 months of 2024, cargo volumes increased by 63 percent year-on-year to 4.1 million tonnes, while container traffic rose approximately 2.6 times to around 50,500 TEU. Transit times on some routes have also improved significantly, falling from 38-53 days to around 19-23 days as coordination and infrastructure improve.

However, the key lesson is not that the Middle Corridor can replace southern routes. Each corridor has its own bottlenecks, meaning resilience depends not only on creating alternatives, but also on improving capacity and operations.

The current conflict has therefore accelerated an existing policy agenda. For Uzbekistan, the southern corridor through Iran remains economically attractive in normal conditions, offering the shortest route to South Asia and the Middle East, though it faces infrastructure and coordination gaps. In wartime, however, its risk-adjusted cost rises sharply due to insurance and security constraints. For Kazakhstan, diversification serves both trade and macroeconomic objectives. Expanding corridor options supports non-oil exports while also helping manage the domestic effects of oil price volatility.

In this sense, corridor diversification is best understood as a portfolio strategy: the goal is not the creation of a single optimal route, but sufficient redundancy to prevent any one disruption from becoming a macroeconomic shock. As the President of Uzbekistan, Shavkat Mirziyoyev noted in 2025, “the recent geopolitical events have once again demonstrated the risks of disruption of the supply chains, highlighting the strategic importance of establishing alternative transport corridors,” explicitly framing redundancy as a response to external shocks. The key implication is that in the wake of the Iran war and the unprecedented disruptions to global trade, connectivity is no longer just an infrastructure issue, but a core element of economic resilience. Countries that invest in diversified, well-functioning corridors will be better positioned to absorb external shocks and maintain stable growth. This challenge is especially acute for the landlocked countries of Central Asia.

Shakhlo Kamaladinova is Central Asia Coordinator for the Bourse & Bazaar Foundation, focusing on the Rihla Initiative for Green Economic Growth. She is a graduate of the Master of Arts in Global Risk program at the Johns Hopkins School of Advanced International Studies (SAIS). She is based in Tashkent, Uzbekistan.

Photo: Canva

Over the last five years, the Bourse & Bazaar Foundation has supported peacebuilding efforts in the Persian Gulf region. The events of the last month have been heavy. Our thoughts are with everyone impacted by this unprecedented war. We are continuing to pursue an end to this conflict through our research and advocacy.

As part of our response to the war and our commitment to providing actionable insights to a wide range of audiences, we have launched a new Substack platform. This post, which has been sent to all of our database subscribers, explains our move to Substack and includes links to several newly published articles. It also includes some important developments about the expansion of the Bourse & Bazaar Foundation.

New Platform

You are receiving this email through our new publication platform on Substack. Moving to Substack provides us a seamless way to publish and share our research and analysis. As a subscriber to the Bourse & Bazaar Foundation, you will receive each article we publish directly in your inbox. We aim to publish around one article per week, so your inbox won’t be overwhelmed.

The analysis we publish offers incisive perspectives on developments in West and Central Asia. Our articles are read widely by policymakers, business leaders, analysts, researchers, journalists, and members of the general public.

In recent weeks, we have published analysis from policy experts based in Tehran, Tashkent, Doha, Singapore, and Paris. Here are some recent examples of the analysis we have published:

What a Durable Peace with Iran Requires

By Zeynab Malakouti and Mohammad Eslami

War Ruptures the Gulf’s Understanding with Iran

By Mehran Haghirian

The Iran War Threatens Central Asia’s Economic Growth

By Shakhlo Kamaladinova

Should you wish to stop receiving emails from the foundation, please feel free to unsubscribe by clicking the link at the bottom of this email.

New Board Members

The foundation has recently added three new board members, who bring a wealth of experience on issues related to economic diplomacy and economic development in West and Central Asia. The expansion of the board came as the foundation marked its five-year anniversary. Our new board members are:

• Luca Giansanti: Ambassador Luca Giansanti, now retired, is a former Italian diplomat. He has held positions including Director General for Political Affairs, Ambassador to Iran, and Ambassador to the EU Political and Security Committee. He is the former Head of European Government Affairs for Eni based in Brussels.

• Zuhra Halimova: Zuhra Halimova is one of Central Asia’s leading policy practitioners. She is a Senior Advisor to CAPS Unlock, an independent policy think tank based in Almaty, Kazakhstan. She also conducts research on the digital transformation of the Central Asia region, working with organizations including the World Bank and GIZ.

• Louis Skyner: Louis Skyner is a partner at the global lawfirm Dentons. Previously, he was leading legal counsel at Norwegian-headquartered energy company Equinor. Aside from his legal practice, Louis has extensive policy experience, having held affiliations with Chatham House and the New Economic School in Moscow.

We are delighted to have Luca, Zuhra, Louis “on board!”

New Associate Fellows

The foundation has also added three new associate fellows, who will be contributing to our work through their writing, research, and participation in key projects:

• Mohamed El Dahshan: Mohamed is a development economist with particular expertise on fragile and post-conflict states in West Asia and Sub-Saharan Africa. He is the founder of OXCON, a consulting firm. He has previously held positions at the United Nations and the African Development Bank.

• Francesco Salesio Schiavi: Francesco is a researcher focused on security, governance, and geopolitical dynamics in the Middle East. He is a Nonresident Fellow at the Middle East Institute of Switzerland (MEIS) and a regular contributor international platforms, including Al-Monitor, Amwaj, The New Arab, and the NATO Defense College Foundation.

• Henrietta Toivanen: Henrietta serves as an independent advisor on diplomacy, mediation, and regional cooperation in West Asia. She was previously a Visiting Fellow at the Bourse & Bazaar Foundation. She holds a PhD and MA from Princeton University in Public and International Affairs.

Keep an eye out for articles by Mohamed, Francesco, and Henrietta in the coming months!

Photo: ESA

By Dina Zayed

The old order is crumbling, and taking billions in development funding with it. Seismic cuts to global aid, paired with a deepening legitimacy crisis in how we organise for social change and the green transition, have left few organisations unscathed. Following a busy year for climate diplomacy and international development finance, the signs are unmistakable: our geopolitical order has shifted. But every collapse creates openings, and some unlikely players may need to step more firmly into the spotlight.

As Western donors retreat and European and North American philanthropies scramble to find their footing, can a new power bloc from the Global South rise to fill the void? And could Gulf philanthropies lead the charge?

The accurate scale and size of the philanthropic muscle in the region is little known, but all indicators suggest that regional philanthropy is a force to be reckoned with. Recent analysis on just the six Gulf Cooperation Council (GCC) countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – estimates philanthropic giving of over $210 billion. In the latest survey of global giving, three countries in the Middle East made it to the top ten. Saudi Arabia and the United Arab Emirates (UAE) also featured as international leaders in giving to transnational causes, with one-third of respondents in both countries donating beyond their borders.

This is part of a picture in which high-net-worth individuals and families from the Global South are rapidly growing in influence, and with it, signaling a shift in global philanthropic dynamics. For example, Asian billionaires are expected to account for more than half of the world’s newest high-net-worth individuals by 2028. The Centre for Asian Philanthropy and Society notes that the potential to give in Asia, where some of the world’s most climate-vulnerable communities live, is at least 11 times more than what is currently donated. The number of billionaires grew sevenfold from 1993 to 2020.

In the Gulf, where nearly 60 percent of the region’s population is under the age of 30, new generations of wealth holders will be redefining the philanthropic landscape in the very near future. Many of these new philanthropists are already showing a greater affinity to climate and energy, and as Badr Jafar, founder of the Pearl Initiative also described, the region’s philanthropic future fits within an overall context in which an estimated $70-90 trillion in global wealth will change hands to millennials and Gen X in the coming decades, with $26 trillion of that in Asia and Africa alone.

For better or worse, since the region hosted the United Nations climate negotiations, several Gulf states have been playing a more pronounced role in green diplomacy and climate action on the international stage. Seasoned observers can see that Gulf development aid is beginning to consider global climate commitments more carefully. As part of the COP28 package, one of the world’s largest private climate investment funds, Altérra, was launched – with an initial $30 billion commitment from the UAE and a vision to mobilize $250 billion in climate solutions by 2030.

The Gulf stands at a crossroads. This is a landscape where concentrated wealth, a growing interest in international development, and a near-existential push for economic diversification can create a rare alignment of interests and resources. For the region’s philanthropies, now may be a good time to chart a new course and help guide the region’s navigation of a new geopolitical era. But if Gulf philanthropies want to wield their seductive power more ambitiously, we first need to understand current giving patterns and reckon with the challenges ahead.

Seasons of Change: Rising Gulf Influence?

The Gulf’s philanthropic ecosystem has a unique history. Gulf philanthropy is, in many ways, a mirror to the state. Royal Foundations, like the King Khalid Foundation and Mohammed Bin Salman Foundation in Saudi Arabia, the Royal Foundation for Humanitarian Action in Bahrain, or Al-Maktoum Foundation in the UAE, operate in ways that closely resemble official foreign aid, and serve as ‘instruments of soft power’ or ‘philanthro-diplomacy.’ Each of these institutions has played an outsized role in supporting national development priorities, and their grantmaking has traditionally appeared to be closely aligned with government visions for social change.

Private foundations, which do not necessarily have direct connections to royal families, still broadly show the extent to which the line between the individual, the family, and the business is blurry. Family businesses in the GCC make up to an estimated 90 percent of the private sector – and this also shapes how private wealth is leveraged for philanthropy. The giving of family offices is tied to reputation and brand, and a tremendous share of giving goes untracked and is unstructured.

Instead, networks, proximity, and relationships are the main determinants shaping giving strategies.

When it comes to climate change, there is generally little data on the state of philanthropic giving in the region, and we know that growth rates are among the lowest in the world. Yet, there is a strong likelihood that some of the region’s most significant areas of focus have climate dimensions that go underreported. Too often, Arab philanthropists are missing from global conversations, especially about the changing role of philanthropy, and we need to do better at capturing their expertise.

Gulf philanthropists have had a strong historical focus on education and health, with some international work around poverty alleviation and relief. Like many of their peers in emerging economies, the tracked information on their giving doesn’t reflect their collective power or financial assets. We also know that there are tremendous transparency challenges. Owing to Islamic and cultural traditions of discretion in giving, the sector has been characterized as “notoriously low profile”. There is little standardization of reporting. But strategic giving and experimenting with new models of grantmaking, including creative online platforms, have a more substantial presence across the region than is often acknowledged – and they are rapidly growing.

So what could this picture tell us about the future of Gulf philanthropy as the region mobilizes to find its place in a new era?

Firstly, in a context where many philanthropic resources are an instrument of soft power and at times, helping lead the way for Official Development Assistance (ODA), reflecting on Gulf aid patterns and recognizing that change is already afoot is one place to start. Gulf donorship has never followed a single logic, and GCC countries have had diverse journeys in how they fund, what they fund, and why – even if much of the GCC’s donor power has tilted towards mobilizing private-sector involvement and social spending.

Trends point to a future in which Gulf philanthropists may invest in technology development, research and innovation, with an emphasis on enterprise and a commitment to backing national agendas.

But Gulf foreign aid has also shifted, over a few decades, from a solidarity-based model to one aligned with a growing emphasis on global governance norms and humanitarianism. Gulf aid favours blended finance and commercially driven giving, with a strong focus on technological platforms and cooperation. Investment priorities and aid mirror one another. Gulf funding has also been called cautious capital, and observers describe an investment agenda paired with what’s been dubbed “bailout diplomacy.”

Second, where Gulf aid has been spent and in what forms it has taken are likely indicators of what to expect from the region’s philanthropies. In contrast to Western aid, as Abdulla N. Khoory at the Fiker Institute shows, the GCC strongly prefers bilateral giving over multilateral assistance, with only 1 to 6 percent of aid flowing through multilateral organisations in a general preference for faster deployment and direct engagement with recipients. The lion’s share of aid spending has also gone to Arab and Muslim countries, which received 62 percent of total aid between 1970 and 2008. As the Rihla Initiative’s Guide to Accelerating Gulf Climate Finance to the Global South details, Gulf states spent $15.1 billion of ODA to Global South countries in the four years from 2019 to 2022. Among the top ten GCC-supported ODA recipients, only Ethiopia and Serbia stand out as non-Muslim majority states.

Third, and much like official aid, Gulf philanthropies tend to fund issues that align with their own national development goals. Their focus has, as a result, been routinely inward, prioritising matters such as youth employment, skill building, and social protection - with more recent and growing interest in issues related to resilience and innovation. Transnationally, GCC philanthropists – often driven by broad definitions of “community” – have a larger footprint in Arab and Muslim countries and commit to issues that resonate at home as well. Emirati philanthropy, much like the UAE’s aid, has a deeper transnational reach and ambitions than many of its peers. For the UAE, which invested more than $118 billion in Africa just between 2020 and 2024, the country has set its eyes on becoming a key player in food security debates. We should have every expectation that its philanthropies will play a role in mobilising research and data to support that vision.

Networks of Trust, Tech, and Enterprise

Now that key economies in the Gulf have committed to ambitious net-zero initiatives and promise a pivot to sustainability and green investment, there are opportunities ahead for the region’s philanthropies to play a more central role in backing national agendas. Even if this transition appears slow and deeply challenging with the Gulf’s unquestionable reliance on hydrocarbons, the region is rapidly expanding its climate finance reach for many issues, especially those that shape the Gulf’s ability to feed itself. There appear to be some strategic opportunities.

“They walk the talk. Especially since COVID-19, the Gulf understands its own place in global supply chains, and they are interested in solving food and water issues,” Haifa Al Kaylani, Founder of the Arab International Women’s Forum, tells me. “Sustainability is a strategic security imperative for many countries in the region. Philanthropy is an important catalyst to support social priorities.”

Now, as the younger generation of philanthropists steps into leadership, a greater degree of enterprise is further likely to take deeper hold. Indeed, given the size of the youth demographic in the Middle East, the future of Arab philanthropy will not be determined solely by large foundations. As Naila Farouky put it years ago, we need to watch a “youth population with a sense of social purpose and the ability to create their own businesses that are both financially viable and able to resolve a social challenge at scale.” This ‘impact investing’ and philanthropy ‘continuum’ has tremendous and underdeveloped potential in the region, and has been formally endorsed by several of the Gulf’s leading and state-affiliated philanthropic funds. In straightforward terms, the picture of a few royal family-affiliated foundations will unlikely be the core and exclusive defining feature of how capital is deployed, and grants allocated.

Taking Saudi Arabia as an example, a continuum between investment, enterprise, and philanthropy is worth observing. Prosperity7 Ventures, one of Saudi Arabia’s leading funds – and part of Aramco’s $2 trillion portfolio, has a focus on energy, sustainability, and digital transformation. Most notable is the country’s National Industrial Development Fund with more than $28 billion in capital. With an emphasis on startup support aligned with the country’s Vision 2030, including renewable energy, these funds have skin in the game as the country works to transform its national and regional economies.

In other words, whether philanthropies play a more central role in supporting innovation and entrepreneurial ecosystems is worth watching – both in their own countries and abroad. There is tremendous untapped potential for patient capital to support innovation across sectors.

Another key connected space to watch is how far the GCC’s philanthropic sector may go in supporting the region’s rapid investment in AI infrastructure and green tech solutions. Predicted to soon emerge as the “new AI equator”, the Gulf has been aggressively working to expand its artificial intelligence capabilities and infrastructure. Saudi Arabia has committed $600 billion over four years, the UAE is adding $200 billion to its existing $1.4 trillion strategy, and Qatar is earmarking $1.2 trillion. While the market and skills are still lagging, the region is cautiously entering a new frontier, with 65 percent of organisations planning to increase their AI spending. Philanthropy should be playing a role in ensuring this AI transformation is more beneficial than harmful.

But all these trends point to a future in which Gulf philanthropists may invest in technology development, research and innovation, with an emphasis on enterprise and a commitment to backing national agendas, where mutual interests for the Gulf and its partners are front and centre. What also seems likely is a continuation of regional philanthropic practices that favor networks, personal relationships, and where trust plays a key role in grantmaking decisions.

But several challenges need to be tackled. For instance, despite immense concentrations of wealth in the region, private philanthropic organisations and family offices have been fewer in number than the volume of regional wealth, in part due to legal conditions governing how charitable foundations are founded and operate. In several countries in the region, philanthropies are explicitly prevented from working in ways that “conflict with customs and traditions” or “violate public morals.” Laws prohibit philanthropic organizations from having public advocacy interests or ‘political goals’ – and that has meant that philanthropies across the region support more service provision efforts, over the building of civil society and policy networks. There is a long record in MENA of philanthropies favouring what they perceive to be low-risk engagements, such as scholarships, university infrastructure, or humanitarian relief, with minimal investment in social movement or field-building activities. The sustainability of that model is worth questioning.

For virtually every country in the region, cross-border donations and the receipt of funds must obtain government approval, and a host of policies condition transnational giving. All these regulations need to be streamlined if regional philanthropy’s full potential can be realized.

Gulf philanthropies have built their giving on mutual trust, not transactions. In this moment of global upheaval, they have a chance to lead not just with money, but with a fundamentally different model – one that prioritizes communities over donor control, and is rooted in a culturally relevant ethos of solidarity and shared strategy. But the challenges are real. As power shifts, so must the rules. We can cling to old paradigms, or we can learn together how to redefine our logic of engagement that shapes how both Gulf philanthropists and their partners determine their climate futures. The choice will define the next era of development.

Dr. Dina Zayed is an independent strategic policy advisor, researcher, communicator and facilitator with expertise in climate adaptation politics and finance, international development and climate governance. She is also a council member of the Rihla Initiative for Green Economic Growth.

Section: (rihla-initiative) Photo: Msheireb Museums

By Mehran Haghirian

“Death to the dictator,” “This is the final battle,” and “Long live the king,” are the slogans Iranians have been shouting in the streets since December. They have returned to the streets in force, with the protests on January 8 involving enormous crowds around the country. While the latest wave of demonstrations began in the bazaars in response to the sharp devaluation of the national currency, these are not merely economic protests. Iranians are exhausted by a deepening impasse across political, social, environmental, and economic spheres, with crises compounding by the day. Under the status quo, the regime, the government, and society as a whole have proven incapable of resolving any of these challenges, leaving lives interrrupted and livelihoods diminished.

The Islamic Republic’s veneer of invincibility was repeatedly shattered during 2025 and continues to break in 2026. For the first time since the end of the Iran–Iraq War in 1988, missiles struck Tehran and cities across Iran during the twelve-day war between Israel and Iran in June. Ever since, the U.S. president has repeatedly threatened action against the country. One of the core bargains the Islamic Republic offered in exchange authoritarian rule after the end of the Iran-Iraq War—that it could shield Iran from further conflict—has collapsed. Its strategies, investments, slogans, and its so-called Axis of Resistance have unraveled alongside its nuclear ambitions. From Syria to Lebanon, Palestine to Yemen, and as far as Venezuela, the regime’s purported allies are either dead, exiled, or imprisoned. The Islamic Republic has reached an impasse. It now waits only for the departure of one man: Ali Khamenei.

Locked and Loaded

In the early days of these protests, Donald Trump declared that the United States was “locked and loaded” and would come to the “rescue” of protesters should the regime violently suppress them. Trump’s intervention reflects the priority Iran has assumed in his foreign policy agenda and the opportunity he sees in making history as the president who could end Iran’s impasse after more than four decades. His messages followed a year of contradictory signaling: a preference for negotiations in the spring, calls for “unconditional surrender” during the June war, and renewed openness to talks in December. Strategic or not, these inconsistencies intensified pressure on the decision-making calculus of regime officials, further destabilizing an already brittle system.

For Trump, the Iran file is unresolved. The fate of enriched uranium and the future of the nuclear program remain pressing concerns. The Iranian nuclear issue—one of the most consequential global challenges of the past two decades—still requires a comprehensive agreement, with or without the Islamic Republic. Trump appears unwilling to allow the issue to linger for much longer.

Despite mounting losses, Khamenei has remained defiant, vowing never to negotiate with the United States. In doing so, he has chosen to sacrifice any last shreds of legitimacy. But Khamenei’s decision to hide in a bunker as Israeli missiles struck the country above him in June was more than symbolic. His political isolation—cornered by arch enemies in Washington and Tel Aviv—is equally consequential. What is unfolding is not merely the humiliation of a man who ruled through repression and archaic fantasies, but the embarrassment of a system that claimed to defend Iran’s independence and dignity while crushing the hopes, aspirations, and futures of its people. Those who justified decades of brutality in the name of sovereignty and deterrence now have nothing left to offer. The events of the past year have pierced the foundational myths of the Islamic Republic.

Scenarios for Change

Iran has reached a moment that generations imagined but never believed would arrive. For decades, Iranians were divided into competing camps—monarchists, reformists, abolitionists, loyalists—yet largely united by a shared sense of patriotic nationalism. Inside the country and across the diaspora, demands often contradicted one another. Some pushed for democracy from the early post-revolutionary years and more forcefully after the 2009 Green Movement. Some called for sanctions, others fought to lift them. Some opposed the 2015 nuclear agreement, others defended it. Some marched against war, others called for targeted strikes. Even the national flag—and the notion of rallying around it—became contested, with some rejecting the regime’s symbols and others embracing ancient ones.

These divisions often drowned out a shared longing for a free Iran because regime collapse seemed impossible. That assumption no longer holds. Given the pace of developments inside Iran and globally, the country has entered the realm of the previously unimaginable. For the first time, Iranians at home and abroad are moving beyond articulating what they reject toward debating what must come next.

To avoid a historic betrayal of the Iranian people, Trump and Netanyahu now carry the burden of their own promises: that they seek to support and rescue the people of Iran, not to destroy the country but to see it flourish.

A political transition is now inevitable, though its form remains uncertain. The central questions of the transitional period are unavoidable: who will lead it, how the military will be unified, when a referendum will take place, and who will contest elections. These are monumental challenges, inseparable from any credible path toward a free, secular, and independent Iran.

Some view a renewed agreement between Trump and the regime as possible, however small the probability; such a deal would nonetheless trigger significant internal change. Another possibility is the regime’s survival beyond Khamenei and the elevation of figures such as Hassan Khomeini or Hassan Rouhani. Yet this outcome, too, would mark irreversible transformation. Incremental reform within a theological system fundamentally disconnected from society has reached its limits.

A third—and more likely—scenario is a takeover by the Revolutionary Guards, a path that could lead to war with the United States and Israel, or result in a political bargain for their survival that would dramatically change Iran’s foreign policy and security doctrine. Over decades, segments of society repeatedly engaged the system—through elections, reformist platforms, and tactical participation—in the hope of averting hardline consolidation. Those efforts failed. The regime was never structurally accountable and grew more distant from ordinary Iranians’ aspirations. Supporting the protesters today therefore requires acknowledging their central demand: the end of the Islamic Republic and its theocratic rule. While Khamenei’s death appears a prerequisite for any scenario to advance, all actors are already positioning themselves for that moment, including the Revolutionary Guard.

A fourth scenario has therefore gained momentum—one that moves beyond the regime altogether. Rather than emerging from negotiations, succession, or military takeover, this path centers on a transition initiated outside the Islamic Republic’s institutional framework. Since December, this possibility has shifted from abstraction to political reality. Leadership of the transition has become central, not as a matter of preference, but of necessity. Many capable figures remain unknown to the public, denied any platform to speak to their compatriots. Numerous political prisoners, exiled activists, and professionals have long prepared to serve their country. Among those widely recognized, Reza Pahlavi remains polarizing yet singular. For some, he represents an autocratic past; for many, he has come to symbolize a rupture with the present system. In an environment where institutional opposition is banned and leadership absent, legitimacy has shifted to the streets—and no alternative figure commands comparable recognition. State-controlled media failed to persuade post-revolutionary generations, while satellite networks and online platforms revived memories of pre-1979 Iran, reshaping public perception. Millions have consumed cable-quality programming highlighting the successes, progress, and modernity of the Pahlavi period on a daily basis for the past decade, if not longer.

Opposition to Reza Pahlavi largely reflects resistance to the idea of monarchy itself rather than to him personally, though some cite contested actions, including his meeting with Benjamin Netanyahu. While a core group of his supporters seek coronation, Pahlavi has repeatedly rejected that role. He has stated that he seeks to lead a transitional process, not return as monarch, arguing that ceremonial kingship would silence him politically. What is instead proposed is a transitional period of twenty-four to thirty-six months, during which a decision council is established, a constitutional committee formed, political parties legalized, civil society revived, independent national media emerge, and urgent economic and environmental challenges addressed. Pahlavi remains the most widely recognized Iranian figure who has openly expressed interest in leading such a process. Other imprisoned figures, such as Nobel Peace Prize laureate Narges Mohammadi and former parliamentarian Mostafa Tajzadeh, also have significant support and will be active players in any political transition.

Iran’s capacity for a smooth transition rests on institutional foundations, many of which predate the Islamic Republic. Core institutions remain largely apolitical and resilient, preventing the collapse of public services. Iran is not lacking in human capital. Millions of professionals inside the country can and will rebuild it.

Iran is not Iraq, Libya, or Syria, but it faces comparable risks. Secessionist movements on its periphery—from Kurdish and Azeri groups to the Ahwazi movement and Jaish al-Adl—pose serious challenges. These threats are compounded by instability beyond Iran’s borders, including by the Taliban and the Islamic State, as well as the influence of major powers such as Russia, China, Israel, and the United States. The violation of Iran’s sovereignty by Israeli and U.S. strikes must not be obscured. Framing those attacks as targeting the regime and its officials was crucial in minimizing their impact on Iran as a state. Nonetheless, innocent lives were lost and civilian infrastructure was targeted. Any further escalation would endanger Iran’s territorial integrity and undermine the legitimacy of any future government.

To avoid a historic betrayal of the Iranian people, Trump and Netanyahu now carry the burden of their own promises: that they seek to support and rescue the people of Iran, not to destroy the country but to see it flourish. U.S. efforts must therefore include protecting Iran’s sovereignty and territorial integrity during a fragile transition. Territory—the map of Iran—is sacred to Iranians. No Iranian, regardless of political orientation, would accept the loss of a single inch of land. A future government will be responsible for safeguarding sovereignty while reintegrating Iran into the international community with dignity.

The Islamic Republic is over, at least as a political force. The greatest danger now is not collapse itself, but the failure to protect the transition from forces—internal and external—that would prefer chaos to a sovereign, democratic Iran.

Dr. Mehran Haghirian is the Director of Research and Programmes at the Bourse & Bazaar Foundation. His work centers on conflict resolution and diplomacy, with a particular focus on the Persian Gulf region. Haghirian holds a PhD in Gulf Studies from Qatar University and a master’s degree in International Affairs from American University’s School of International Service in Washington, D.C.

Section: (vision-iran-initiative) Photo: IRNA

By Esfandyar Batmanghelidj

Economic inequality is the single most important issue in Iran. All of the country’s political and social ills pour forth from the crucible of inequality. A successful political transition in Iran requires more than just identifying problems, it requires a positive vision for Iran and solutions to the country’s problems. But no opposition leader, whether inside or outside of the country, has managed to explain how they will deliver economic justice in Iran. Until such a positive vision emerges, there is nothing for protestors to rally around but slogans and a shared expression of anger.

To their credit, Reza Pahlavi and his boosters have done some work to set out their vision for Iran’s transition. There is a lot to say about their vision, including the striking level of institutional continuity even they are willing to accept were they to inherit the state structures of the Islamic Republic. But the critical flaw of their plan is a stunning failure to address the issue of inequality.

In the six papers on “Economic and Social Stabilization” published by NUFDI and endorsed by Pahlavi, there is barely any examination of inequality. In fact, across the reports, which total 164 pages, the word “inequality” appears only once. This is an extraordinary blind spot and it points to a failure to see the political conditions in Iran for what they really are.

Most critics of the Islamic Republic falsely believe that the reason the country has struggled economically is because of the role of state ownership in the economy and the creation of a bloated welfare system that represents a kind of Islamic socialism. They believe that economic reforms in Iran require cutting red tape, respect for private property, reliance on market mechanisms, and fiscal discipline. In other words, they are calling for classic neoliberal interventions. But these are precisely the reforms that have been attempted by the economic policymakers of the Islamic Republic for nearly three decades, spearheaded by economists who were trained in the United States and United Kingdom to worship the likes of Friedman and Mankiw.

The reason these reforms have failed is not because the Islamic Republic did not understand neoliberalism, the reason is that the Islamic Republic applied neoliberal ideas in an environment where they were prone to abuse. Iran’s current leaders basically undertook their own version of shock therapy, which raised living standards from the early 1990s to the mid-2000s but did so in a manner that concentrated purchasing power among a small elite (see the chart below from Djavad Salehi-Isfahani, which uses data from Iran’s Household Expenditures and Income Survey).

At the same time, across multiple administrations, the economic program eroded the authority of the administrative state in ways that allowed economic elites to put their interests above those of the rest of society. There was no effort to rein in rampant financialization and speculation, no organized industrial policy, no protection of welfare spending. The state relied on economic growth to forestall social tensions. But the rich wanted a bigger piece of the pie and the state did not stop them from grabbing it, even when the pie ceased growing under sanctions. Social provision in Iran remains intact, but its structures are groaning under the weight of these economic contradictions.

In the 2023 wave of the Arzesha-ha va Negaresh-ha Iranian (“Values and Attitudes of Iranians”) survey, a robust nationally representative poll fielded by Iran’s Ministry of Culture, respondents were asked “Do you think the gap between the rich and the poor has widened or narrowed compared to five years ago?” A significant 88 percent of respondents reported that the gap had widened. Moreover, 78 percent of respondents agreed with the statement that “In our society, the rich get richer every day, and the poor get poorer.”

In light of these sentiments, why don’t people like Pahlavi address the issue of inequality? A few reasons come to mind. First, a political opposition rooted in the deeply unequal United States, boosted by prominent Republicans, and supported by a wealthy diaspora who like low taxes, small government, and want to “Make Iran Great Again,” is probably ideologically incapable of addressing the issue of inequality in Iran.

Second, even if there is some ambient awareness of the problem of inequality, there may tactical considerations. In the immediate future, the Pahlavi camp’s best hope for “revolution” relies on elite defections, given the repeated failure of protests to reach a critical mass. Understandably, if you want economic elites to get on board with your political program, you are not going to talk about real class politics.

Finally, any true reckoning with the issue of inequality would reveal uncomfortable truths, including the fact that exacerbating inequality was an intentional aim of U.S. sanctions policies, which were callously endorsed by the diaspora. Iranians were made poorer so they would become angrier. With one hand tied behind their backs by the Islamic Republic, and another hand tied by the United States, they were pit against the rich, who have remained out of reach in their proliferating office towers and hilltop villas. This has been its own injustice.

One reason I do not believe we have arrived at a decisive moment in Iran’s political transition, let alone a moment of revolution, is that we are not even talking about the stakes in Iran using the right language and we have yet to envision a transition that deals with the main grievances in the country. We are still in the process of clarifying the stakes and identifying solutions.

As we make progress towards some kind of fundamental political change in Iran—I strongly believe progress is being made—it is important to recognize that Iranians are not seeking a political revolution, they are seeking a social revolution. Alongside their political rights, Iranians are demanding economic opportunity and social dignity. In this context, a democratic transition without economic redistribution will achieve nothing—it will not be able to consolidate.

The reason the political project of the Islamic Republic has failed is because of the failure to redistribute wealth successfully and sustainably, especially as sanctions stymied growth. Most economies around the world are breaking with the neoliberal consensus. Iran should do the same and pursue state-led investment to drive productivity growth, renew the commitment to social welfare to reduce economic precarity, and ensure purchasing power is spread across the income distribution more equitably.

The uncomfortable reality is that the drivers of today’s protests today are the same as those behind the protests in 1978-1979. The political economy of the Pahlavi Monarchy and Islamic Republic are strikingly similar—two systems that accumulate wealth for the rich through forms of renterism and economic repression. We all know a democratic system will be better for Iran, but what economic system will break this cycle that pits the weakened poor against the strengthened rich? Until we answer that question, there will be no successful political transition, even if the Islamic Republic is pushed over the edge.

Section: (vision-iran-initiative) Photo: IRNA

By Nikolay Khozhanov

The evolving global energy landscape can catalyse stronger ties between the Gulf Cooperation Council (GCC) states and the countries of Central Asia. Over the past fifteen years a cascade of disruptions has reshaped energy markets—beginning with the shale revolution, followed by the accelerated fourth energy transition, underinvestment in hydrocarbons, the COVID-19 pandemic, the war in Ukraine, and, most recently, the return of Donald Trump to the White House in 2025.

These overlapping shocks have reshaped the structure of global energy markets, causing their volatility and giving rise to several new defining trends. Uncertainty has become systemic, undermining the ability to predict market dynamics. Traditional trade flows have shifted: Russia has redirected energy exports to Asia and the Middle East, while the EU’s hydrocarbon phase-out and the US’s pivot towards energy exports have intensified competition for Asian markets. As a part of this strategic shift, the GCC countries had an opportunity to play a role in replacing the lost volumes of Russian hydrocarbons at the European market. While in 2021 the total import of mineral fuels from the GCC to the EU was worth €25.1 billion, in 2022 it peaked at €65.5 billion and remained high at €58.4 billion in 2023. By 2024, fuel made up over 75 percent of the EU’s total imports from the GCC region.

Simultaneously, global political and economic instability has slowed the decline of fossil fuels even as it accelerates the push for renewable energy sources. One of the major forces in this transition is China. No longer a passive participant, Beijing has emerged as both a top importer of Gulf hydrocarbons and a global leader in renewable technology exports. By the mid-2020s, Gulf producers supplied more than 40% of China’s crude oil imports. Saudi Arabia has consistently vied for the position of Beijing’s leading supplier, while Oman, the UAE, and Kuwait also rank among China’s key energy partners. At the same time, China has become indispensable for the Gulf’s renewable ambitions: Chinese firms play a dominant role in providing solar and wind equipment to the region. In 2022 and 2023, for example, the UAE sourced 99.1 percent and 98.8 percent of its solar modules from China, while Oman relied on Chinese imports for 78.6 percent and 83.5 percent of its modules in those years. This dual role has strengthened China’s position as a central energy pivot between Asia and the Middle East and opened doors for cooperation between China and GCC member states in third countries, including Central Asian republics.

Dual-Track Strategy

The Gulf states have responded to the energy markets upheaval with a dual-track strategy: protecting hydrocarbon revenues while advancing green transformation. On the defensive front, GCC producers are working through OPEC+ to stabilise markets and are maximising export capacity through efficiency gains—for example, by replacing domestic oil use with natural gas.

At the same time, energy producers across the Gulf region are engaging in mutually beneficial cooperation that extends beyond traditional alliances. This includes efforts to enhance each other’s export capabilities. For example, Kuwait is reducing domestic oil consumption—thereby freeing more crude for export—by importing LNG from Qatar, even at the apparent cost of greater energy dependence on a single supplier.

This practice extends beyond the region as well. GCC member states increasingly have the opportunity to invest in the downstream and upstream sectors of potential competitors outside of the Gulf. In doing so, they form new alliances and diversify future revenue streams, thus disincentivising potential competition among oil and gas producers.

On the “green” track, notable progress has also been made. To enhance the environmental image of their hydrocarbon exports, GCC countries are actively investing in carbon capture technologies and integrating renewables into oil and gas production and export processes. A distinct—albeit often controversial—component of this strategy is the development of “blue” and “green” hydrogen projects. Additionally, GCC investors are showing growing interest in overseas ventures related to renewable energy development, particularly in emerging supply chains for the components and materials essential to renewable generation and distribution.

Amid these dynamics, closer energy ties with Central Asia are emerging as a strategic extension of the GCC’s global ambitions. Both regions possess vast hydrocarbon reserves and share a rising commitment to renewable development. Their partnership is being formalised through high-level diplomacy—most notably the 2023 GCC-Central Asia Summit, which produced a joint action plan (2023-2027) focused among other things on energy, trade, and infrastructure.

The intersection of global energy realignment and regional ambition has opened a window of opportunity for enhanced Gulf-Central Asia energy cooperation.

Several specific areas of cooperation are gaining momentum. GCC countries are increasingly demonstrating interest in expanding into Central Asian energy sectors, including oil, gas and electric energy production. The UAE’s ADNOC is in discussions with Kazakhstan’s QazaqGaz regarding potential joint ventures, and with Turkmenistan’s Türkmengaz to co-develop the Galkynysh gas field. These moves align with Turkmenistan’s goal of reducing overdependence on China.

Through Dragon Oil, the UAE also holds a stake in offshore oil production in Turkmenistan. Meanwhile, Saudi Arabia’s ACWA Power is spearheading a $7.5 billion investment in Uzbekistan’s power infrastructure, including a 1.5 GW gas plant. In 2024, Qatar’s Nebras Power and Pearl Overseas expressed interest in building combined-cycle and hydroelectric plants in Kazakhstan.

Both regions are investing in alternative transport corridors to bypass traditional chokepoints, opening further avenues for mutual cooperation. Kazakhstan and Azerbaijan are advancing the Trans-Caspian “Middle Corridor,” with potential extensions to Gulf ports via Turkey and Iraq’s planned “Dry Canal.” This would establish a north–south energy axis, reducing both transit time and cost. GCC actors like DP World and AD Ports are already involved in developing logistics infrastructure at key Caspian ports like Aktau and Baku. The geopolitical role of Iran is also worth noting. Integrating Iran into regional transport corridors could significantly enhance trade flows between Central Asia and the Middle East.

At the same time, Kazakhstan and the UAE are operating tankers on the Caspian Sea to transport oil to Azerbaijan for onward shipment to Europe, partially bypassing Russian-controlled routes. The UAE and Saudi Arabia have also shown interest in ambitious cross-border infrastructure projects, including the Turkmenistan–Afghanistan–Pakistan–India (TAPI) pipeline and the long-proposed Trans-Caspian gas pipeline to Europe.

On top of these efforts, the GCC-Central Asia cooperation could possibly enhance knowledge exchange and local capacity building. Several Gulf-funded energy projects in Central Asia are structured as joint ventures with local partners, facilitating the transfer of technical expertise and operational know-how. For example, the 1 GW wind farm in Kazakhstan—developed by the UAE’s Masdar in partnership with Qazaq Green Power and the Kazakhstan Investment Fund—ensures active participation by local engineers and firms in both construction and project management. There is also growing interest in academic cooperation, with institutions in both regions exploring joint programmes in petroleum engineering and renewable energy.

Finally, GCC and Central Asian producers also have potential for coordinating efforts at the policy level. Kazakhstan and Oman, alongside other GCC members, participate in OPEC+ arrangements aimed at stabilising global oil markets through coordinated output policies. This collaboration helps manage price volatility and supports market predictability amid growing geopolitical and economic uncertainty. Saudi Arabia’s Crown Prince Mohammed bin Salman has publicly advocated for deeper strategic coordination between the GCC and Central Asia to ensure long-term energy security at both regional and global levels.

Addressing Shared Challenges

Beyond production policy, shared challenges posed by the fourth energy transition can become another topic for discussion between the GCC and Central Asian States in the future. For instance, they can discuss a collective response to external regulatory pressures, such as the European Union’s Corporate Sustainability Due Diligence Directive (CS3D) which imposes new sustainability and transparency requirements on suppliers in global energy value chains. Coordinated action in this sphere could help producers in both regions adapt to evolving compliance standards and safeguard their access to European markets.

Despite this momentum, several barriers persist. Many initiatives remain in the early stages of implementation or even stagnate. Knowledge-sharing programs are limited in scope or entirely absent. Tensions within OPEC+ have also begun to surface, as evidenced by Kazakhstan’s 2025 statement prioritising national interests over quota compliance.

Geopolitically, Central Asia remains intertwined with Russian infrastructure. As of 2024, roughly 80 percent of Kazakh oil continues to transit through Russian pipelines, rendering Gulf investment politically sensitive. Simultaneously, China’s entrenched dominance in regional energy—via pipelines and Belt and Road Initiative (BRI) projects—restricts Gulf access and introduces competitive pressures.

Security risks also pose significant challenges. The TAPI pipeline remains stalled due to instability in Afghanistan. Although the Taliban has pledged to protect the project, lingering uncertainty continues to deter Gulf investors. Infrastructure constraints further complicate energy connectivity: Central Asia’s landlocked geography makes it reliant on third-party transit states. Key projects such as the Trans-Caspian Gas Pipeline remain unrealised, limiting Turkmenistan’s access to European markets.

Iran’s exclusion from regional transport plans—due to international sanctions—prevents fuller connectivity between Central Asia and the Gulf. Internally, Central Asian states grapple with regulatory and legal obstacles, including inconsistent frameworks and weak rule of law, which deter long-term foreign investment.

Nevertheless, the intersection of global energy realignment and regional ambition has opened a window of opportunity for enhanced Gulf-Central Asia energy cooperation. Both regions are resource-rich and seek economic diversification amid global volatility. Their growing collaboration spans investments, logistics, policy coordination, and knowledge exchange—laying the foundations for a potential Eurasian energy corridor.

Yet transforming this potential into a durable alliance will require sustained commitment, improved infrastructure, legal harmonisation, and careful geopolitical navigation. If successful, this partnership could reshape the energy geography of Eurasia and anchor both regions more securely within the global energy order.

Nikolay Kozhanov is Research Associate Professor at the Gulf Studies Center of Qatar University and Non-Resident Scholar at the Economics and Energy Program of the Middle East Institute.

Section: (integrated-futures-initiative) Photo: Canva

By Jessica Obeid

For decades, Central Asia’s power systems have been bound to Soviet-era legacies: outdated, inefficient, and heavily interconnected with Russian infrastructure. Today, governments are working to dismantle these dependencies and build new energy systems centered on sustainable technologies, financed and strategised largely with Gulf support.

This emerging partnership reflects a wider transformation. Central Asia is seeking fresh partners to modernize its energy sector amid rising geopolitical uncertainties. Countries such as Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan, and Tajikistan are attempting to shed the Soviet legacy by diversifying both their energy mix and their international partnerships.

The region faces mounting challenges: surging electricity demand, unreliable supply, and intensifying climate risks. In response, governments are pursuing scalable, low-cost, low-carbon energy solutions to reduce reliance on natural gas, coal, and hydropower—all while constrained by dependence on coal and limited fiscal space. Gulf-backed investments offer an attractive alternative. Through state-owned giants such as ACWA Power and Masdar, Gulf states are exporting megawatts of clean energy, deploying solar, wind, storage, and green hydrogen by leveraging oil revenues.

What is taking shape is a “Green Road” between the Gulf Cooperation Council (GCC) and Central Asia—echoing the Silk Road’s legacy, but powered by wind turbines and solar panels rather than wells. It is redefining trade linkages through climate-resilient infrastructure, technology transfer, and inter-regional cooperation. Clean energy here is not only a tool for decarbonization but also for economic growth, geopolitical influence, and development. This partnership is forging a new regional energy model, bolstering Gulf soft power while opening economic opportunities across Central Asia.

The GCC’s growing clean energy footprint in Central Asia signals a forward-looking strategy: a pivot from fossil fuel exporters to global enablers of the energy transition. By transforming hydrocarbon wealth into a diversified portfolio of clean energy assets, Gulf states are securing a place in the low-carbon future.

At the centre of this shift are state-backed developers. ACWA Power, half-owned by Saudi Arabia’s Public Investment Fund, and Masdar—jointly owned by Mubadala, TAQA, and ADNOC—are rapidly expanding their international presence. ACWA Power holds 52 GW of renewable capacity across 15 countries, while Masdar’s portfolio exceeds 51 GW in 40 countries spanning Asia, Africa, and Eastern Europe.

These firms bridge business and diplomacy, advancing national strategies through high-impact investments in renewables, storage, and green hydrogen. They export expertise, technology, and a replicable model for utility-scale clean energy deployment. In doing so, they are laying the foundations of a new energy corridor built on sustainability.

Central Asia is a natural frontier. Vast, underutilized land, rising electricity demand, and its strategic position at the crossroads of China, Russia, and South Asia make it a low-risk, high-reward opportunity. Gulf states are extending their geopolitical influence in a region once dominated by great power rivalries—now increasingly oriented toward the energy transition. In Uzbekistan, for instance, ACWA Power is developing a 1.5 GW wind farm worth $2.4 billion, while Masdar has completed the 500 MW Zarafshan wind farm, the largest in Central Asia to date.

Despite their hydrocarbon reserves, Central Asian countries face severe electricity challenges. Demand is rising due to population growth, urbanisation, and industrialization—particularly in Uzbekistan and Kazakhstan, where demand increased by 4 percent year-on-year in 2024. This surge collides with limited generation capacity and aging infrastructure.

The regional energy mix remains dominated by natural gas (43 percent), coal (30 percent), and hydropower (24 percent). Yet gas faces mounting pressure: domestic consumption is rising, leading Uzbekistan to restrict exports. Turkmenistan depends almost entirely on gas, while coal is entrenched in Kazakhstan, where it supplies nearly 70 percent of power generation.

Hydropower, meanwhile, is increasingly unreliable. Kyrgyzstan and Tajikistan depend on it for 80 to 90 percent of electricity, but droughts, climate volatility, and cross-border tensions undermine output. New hydropower projects are fraught with political obstacles and regional disputes. Much of the sector still relies on Soviet-era plants—inefficient, outdated, and beyond their intended lifespans.

Electricity systems also suffer from inefficiencies and subsidies. Grid losses reach 22 percent in Kazakhstan and Tajikistan, while tariffs cover only 65 percent of generation costs across the region. This contributes to fiscal deficits ranging from 4 percent of GDP in Tajikistan to 6 percent in Uzbekistan. Imports help fill gaps, but regional trade is limited, fragmented, and politically sensitive.

By contrast, Central Asia’s solar and wind potential remains largely untapped. Vast land and abundant resources stand against weak project pipelines, policy uncertainty, and limited institutional capacity.

In this context, Gulf-backed clean energy investments act as a catalyst. With low-cost capital, proven delivery capacity, and competitive generation costs (2.5-3.5 cents per kWh), developers like ACWA Power and Masdar bring not only finance but also execution, engineering expertise, and capacity-building.

For Central Asia, this translates into more reliable power, a diversified mix, and greater climate resilience. For the Gulf, it supports economic diversification while elevating its energy champions as credible global actors. Clean energy exports both shield Gulf economies from fossil fuel volatility and expand their geopolitical influence.

These partnerships bridge financing gaps, stimulate regional development, and strengthen political stability through modernized infrastructure.

The Gulf-Central Asia alliance marks a new phase in both regions’ energy trajectories—anchored in mutual interests and a shared vision of a low-carbon future. For the Gulf, it brings economic and diplomatic dividends beyond oil. For Central Asia, it offers a pathway to modernize power systems and reduce long-standing vulnerabilities.

The “Green Road” under construction is more than a metaphor. It is an emerging infrastructure and investment corridor that symbolizes a new model of South-South cooperation, grounded in clean energy.

Its success will depend on sustained political commitment, cross-border coordination, and scalable innovation. If these align, the GCC-Central Asia energy corridor could become a landmark in the global energy transition—turning risk into opportunity.

Jessica Obeid is an energy engineer and strategist. She is the Founding Partner of New Energy Consult.

Section: (rihla-initiative) Photo: ACWA Power

By Barzin Jafartash Amiri

The confirmation of Seyed Ali Madanizadeh as Iran’s new Minister of Economy comes at a pivotal moment. For decades, Iran has struggled under the weight of economic sanctions and chronic internal mismanagement, which have eroded its institutions and stifled growth. Now Iran finds itself in the opening stages of what could prove a long war with Israel. Iran’s new economy minister faces unprecedented challenges.

At 42, Madanizadeh embodies a new generation of post-revolution technocrats—professionals who are not tethered to political factions. His academic pedigree is exceptional. He began his ascent by winning a bronze medal at the 2000 International Mathematical Olympiad. He then earned a degree in Electronic Engineering from Iran’s prestigious Sharif University. He went on to earn a master’s in Applied Mathematics from Stanford University in 2007 and a PhD in Economics from the University of Chicago in 2013. Most recently, he served as an Associate Professor of Economics at Sharif University of Technology and Dean of its School of Management and Economics. His nomination raises a pressing question: can a technocrat steer Iran’s battered economy through an unexpected war?

What distinguishes Madanizadeh, beyond his credentials, is his capacity to bridge Iran’s deep political divides. Despite his Western education and lack of political affiliation, he enjoys rare respect across the political spectrum. His religious background, combined with a reputation for competence and integrity, makes him a unifying figure in a polarized political landscape—a role he could leverage to manage Iran’s economy in wartime while pushing through long-stalled reforms.

Madanizadeh is well-versed in Iran’s economic challenges. As a pragmatic economist, he has spent years analyzing the domestic economy and advising state bodies. His key priorities—curbing the budget deficit and reforming the banking sector—are two of Iran’s most entrenched structural problems. Having contributed to legislative efforts, including by drafting banking laws, Madanizadeh is well-equipped to rein in underperforming banks, particularly private ones such as Ayandeh Bank and Bank Pasargad. A government-led restructuring of these banks could help restore financial stability. However, this would demand not just technical skill but also political determination.

One of the thorniest issues for Iranian economic policymakers is the multi-tiered exchange rate system. By subsidizing imports to ostensibly preserve consumer purchasing power, it penalizes exporters, who are required to sell foreign currency earnings at below-market rates in the NIMA system. Reforming this system will provoke resistance from vested interests. But if Madanizadeh can mobilize support for his plan, he could make headway where his predecessors have failed.

Madanizadeh has proposed a phased shift away from broad, indirect subsidies toward a more targeted welfare model. Central to his plan is the reallocation of state support. Rather than subsidizing goods and services, financial assistance would be directed to individuals through a more transparent and organized welfare system. To ease the transition, he suggests launching a package of compensatory cash transfers and a coordinated public awareness campaign. If implemented effectively, this reform could ease the fiscal burden on the government, which currently devotes a large share of GDP to inefficient subsidies.

But fiscal and monetary reforms will not suffice. Madanizadeh must also confront harmful government interventions, chief among them rigid price controls. The automobile industry is a case in point: populist price policies have turned once-profitable car manufacturers into loss-making firms within a highly protected market. Rolling back such distortions while Iran remains under sanctions is politically risky, but necessary. Madanizadeh’s strategy, outlined in the economic plan he submitted to parliament ahead of his confirmation vote, calls for a shift from import substitution to export promotion—a significant departure from Iran’s historically insular economic model. The war will prevent him from pursuing this strategy in the short-term, but Madanizadeh’s proposal suggests he is prepared to challenge the orthodoxies of Iranian economic policymaking.

Madanizadeh’s overall approach to economic reform is rooted in pragmatism and incremental change. On a recent episode of Sekke, a popular Iranian economics podcast, he explicitly rejected radical free-market experiments, advocating instead for gradual reforms to avoid the destabilizing effects of economic shock therapy. With Iran’s subsidies on energy and basic goods reaching unsustainable levels, a gradual approach to reforms may prove wise as Iran faces the destabilising effects of Israeli attacks.

On sanctions, Madanizadeh has adopted a nuanced and politically astute position. While he publicly supported the nuclear negotiations and the pursuit of sanctions relief, he argues in his published plan that the economy must be prepared for the possibility of sustained sanctions and continued isolation should negotiations fail. His approach resonated with conservative factions, who are skeptical of US intentions and doubtful that sanctions will ever be lifted. Madanizadeh was confirmed with 171 votes from a total count of 246 parliamentarians.

Madanizadeh’s confirmation is also symbolic for Iran’s youth. As a highly educated, politically unaffiliated figure, his appointment represents a break from the dominance of the first-generation revolutionaries. For the youth cohort often sidelined from senior positions, his appointment offers a rare sense of inclusion and possibility. If he succeeds, his tenure could mark the beginning of a broader bureaucratic shift—one that values technocratic merit over ideological loyalties. By strengthening ties between Sharif University and government bodies, Madanizadeh could help reverse the brain drain and give Iran’s brightest minds a reason to enter public service.

Madanizadeh’s ties to the Iranian diaspora and emphasis on technology, startups, and the “smart economy” are especially significant. This recalls the early Rouhani presidency, when optimism surrounding the JCPOA and the outreach of some cabinet members to the diaspora encouraged a wave of returnees, many of whom played a crucial role in developing Iran’s digital infrastructure. If Madanizadeh’s policies are supported by progress on the nuclear file and eventual sanctions relief, a similar dynamic could unfold, bringing with it not only capital and technical expertise, but renewed energy and ambition.

Overall, the confirmation of Iran’s new economy minister presents a rare opportunity for the country to confront its deep-rooted economic crises with evidence-based, technocratic leadership. Madanizadeh’s academic background, practical policy experience, and political neutrality position him as a credible agent for reform. While obstacles abound, not least the intensifying conflict with Israel, his confirmation reflects an important strand of Iranian politics—neither liberal reformist nor anti-modern conservative—that speaks to a younger, marginalized demographic eager to shape Iran’s future.

Barzin Jafartash Amiri is the Editor-in-Chief of Voice of Manufacturing, an Iranian publication.

Section: (vision-iran-initiative) Photo: EcoIran