Geopolitics and Security
What we are tracking
The Wall Street Journal reported on August 17 that hardline elements in Iran’s leadership treated June’s memorandum of understanding as preparation for further conflict rather than a path to settlement, according to Arab intelligence findings and intercepted communications between Tehran and allied militias. The report, by Benoit Faucon and Summer Said, says the leadership gave the Islamic Revolutionary Guard Corps greater control of the regular army, appointed veterans of the Iran-Iraq War to senior posts, expanded domestic counterintelligence operations, and accelerated missile and drone production. Command of the regular army and the Guard was reportedly unified under Brigadier General Ali Abdollahi. Officials familiar with the findings said the Guard used the period of relative calm to coordinate with allied militias, sending advisers to Iraq, Yemen and Lebanon. The report landed on the same day the 60-day memorandum expired without a follow-on agreement. A Tehran-based defence analyst quoted by the paper said there is a widespread view in Iran that the main war has not yet begun.
Why it matters
If the account is accurate, it reframes the past two months. The memorandum was not a pause that failed but a window one side used deliberately to prepare. That distinction matters for how Gulf governments and businesses plan, because it implies the current lull is a staging period rather than a drift toward settlement, and that the expansion of attacks into the Red Sea was a strategic choice rather than an improvisation. The report also lands alongside the memorandum’s expiry and Washington’s threats toward Oman, leaving the region without a functioning diplomatic framework for the first time since June.
What to watch
Whether the expiry of the memorandum produces a renewed negotiating track or a fresh round of strikes; how Gulf states adjust force posture and civil defence given the reported build-up; and whether these intelligence findings shape US decision-making on further escalation.
Energy and Markets
What we are tracking
Bloomberg reported on August 16, citing people familiar with the matter, that regional producers are allegedly moving large volumes of crude out of the Persian Gulf by ferrying barrels through the Strait of Hormuz and transferring them to tankers waiting in the Gulf of Oman. The report claims that volumes may be running above market estimates of four million barrels a day, although precise figures are reportedly difficult to establish. Before the war, roughly 20 million barrels a day crossed Hormuz. US Energy Secretary Chris Wright reportedly said last week that nine million barrels a day had crossed over the previous seven days. Bloomberg also reported that two ships were seen loading at Saudi Arabia’s Ras Tanura hub, while 16 Bahri supertankers were positioned off Oman, with three more expected. The purpose of these movements has not been confirmed.
Why it matters
If claimed the reported activity could help explain why the global economy has not experienced the energy shock widely forecast when the war began. Brent has spent most of August between $80 and $90, despite continued disruption in the Strait of Hormuz. The reported transfers may be helping regional producers maintain supply to global markets by adapting their export operations under difficult conditions. However, the scale and nature of the activity remain unclear, and the reported arrangements may depend on vessels continuing to operate through a contested waterway.
What to watch
Whether further reporting or official statements confirm the scale and nature of these movements; whether additional security incidents affect vessel activity; how insurers respond as conditions evolve; and whether regional producers introduce more formal measures to support exports outside the strait.
Trade and Infrastructure
What we are tracking
Arabian Business set out the case for an overland rail corridor that would eventually connect Dubai to Istanbul. The concept links the UAE’s Etihad Rail network, which now spans roughly 900 kilometres across all seven emirates, to the wider GCC railway and onward through Saudi Arabia, Jordan and Syria into Turkey. Several pieces have advanced this year. Turkey and Saudi Arabia signed memoranda in Riyadh in June covering railway technology, infrastructure development and long-term connectivity, including a potential revival of the historic Hedjaz corridor, with feasibility studies for the Saudi section expected to conclude by the end of 2026. Turkey has separately said it will reopen its land trade route to Jordan and the Gulf through Syria. Abu Dhabi’s ADQ has held talks with Ankara on a rail crossing of the Bosphorus, a project for which multilateral lenders approved $6.75 billion in financing in March.
Why it matters
The strategic logic is the same one driving the UAE’s port and pipeline expansion on its east coast: reduce dependence on a single maritime chokepoint. An overland corridor to Turkey would give Gulf exporters a route into European markets that avoids Hormuz, Bab el-Mandeb and Suez, all three of which have been disrupted in the past three years. It would also deepen commercial ties with Ankara at a moment when Turkey is already becoming a closer security partner following the Mecca defence pact. The obstacles remain considerable, and the Syrian section is the hardest part of the route.
What to watch
Whether the Saudi feasibility studies conclude on schedule at the end of 2026; whether the Syrian section attracts the financing and security guarantees it would require; and whether Gulf sovereign funds move from discussion to committed capital on the Turkish segments.
Economy and Regional Outlook
What we are tracking
Arab News reported on August 16 that BMI, a Fitch Solutions company, expects the Middle East and North Africa economy to contract by 3.3 percent in 2026 before rebounding by 8.5 percent in 2027. The revised forecast is significantly weaker than BMI’s June projection of a 0.9 percent contraction and would mark the region’s deepest downturn in four decades. BMI attributed the downgrade to prolonged disruption in the Strait of Hormuz, which it expects to delay the recovery in hydrocarbon production, trade, investment, and services. The forecast is uneven across the Gulf. BMI expects Oman to grow by 2.9 percent in 2026, the UAE by 0.3 percent, and Saudi Arabia to contract by 1.3 percent. It expects commercial traffic through Hormuz to recover by the end of 2026 or the first quarter of 2027.
Why it matters
The forecast shows how disruption in Hormuz is moving beyond the energy market and into the region’s wider economic outlook. Lower hydrocarbon output affects government revenue, while weaker trade and services activity could weigh on private-sector growth. The variation across the Gulf also underlines the value of export routes that bypass the strait, with Oman expected to record the region’s strongest performance. The projected 2027 rebound is substantial, but it depends on shipping recovering and hydrocarbon production returning, making the timing of normalization central to the outlook.
What to watch
Whether commercial traffic through Hormuz begins to recover before the end of 2026; whether BMI revises its outlook again as shipping conditions evolve; how Gulf governments respond to weaker growth and revenue; and whether the expected recovery in hydrocarbon production, trade, and services produces the forecast rebound in 2027.
Related articles
- Iran’s Secret Plan to Escalate the War
- Covert Mideast Oil Flows Are Keeping Global Prices in Check
- Dubai to Istanbul by rail
- Exclusive: Saudi Arabia tightens anti-crime oversight on UAE-bound bank transfers
- Saudis Offer to Sell Oil Near Oman, a Possible Sign They’re Sailing Dark Through Hormuz
- Trump threatens to bomb Oman with Iran war stuck in stalemate as 60-day negotiation period ends
