The Sunni majority GCC (Bahrain’s ruling class is Sunni with a Shia majority population) and the Shia-majority indeed have gone through rough patches but a direct military confrontation was unimaginable before March 2026.

The current situation may alter regional dynamics not in the foreseeable future but for the coming decades. 

Shifting Ties

GCC-Iran ties have undergone a shift as Gulf states face increasing, direct attacks on energy infrastructure and shipping, prompting the bloc to consider active self-defence measures. Except for Oman, which has shown maturity in its diplomacy, Qatar, the UAE, Kuwait and Saudi Arabia have been targeted by Iran. While there are speculations that both Saudi Arabia and the UAE want the US to neutralise Iran’s military power, the two are showing extreme restraint by not attacking Tehran in response to the attacks.     

While seeking to avoid direct involvement in a wider war, the GCC states are increasingly adopting a rather defensive approach, as evidenced by statements regarding the need for "self-defence" and securing vital energy infrastructure in the Gulf.

They are well aware that retaliatory strikes will lead to a barrage of Iranian retaliatory strikes, which could be difficult to handle for locals and expatriates.

Normalisation Efforts

Despite 2023 normalisation efforts and a 2024–2025 detente aimed at reducing conflict, the recent targeted drone and missile attacks by Iran against Saudi Arabia have dismantled the previous diplomatic achievements. 

The 2023 Chinese-brokered deal, which aimed to restore ties between Tehran and Riyadh, is clearly collapsing. After all, despite the thaw, mistrust remains high, and the Iran-Saudi relationship faces tests from ongoing regional instabilities laced with rivalry for regional influence. 

Iran has tried to exploit differences in national approaches, specifically focusing attacks on the UAE due to its close ties with Israel. Following a series of Iranian attacks, the UAE reported its air defences engaged over 300 ballistic missiles and over 1,700 drones launched from Iran.

Historical Partnerships

The UAE, particularly Dubai, has traditionally served as a major trade partner for Iran, with a large Iranian expatriate community. Historically, the UAE has been one of Iran's largest commercial partners, with bilateral trade touching around US$28 billion in 2024.

Nearly 500,000 Iranians live in the UAE, mainly in Dubai and Sharjah, and over 8,000 Iranian-backed businesses operate there, holding an estimated $300 billion in assets.

Impact On Economies

Now is a cause for serious concern for India. A slowdown in the UAE economy has a direct impact on India, with several businesses operating out of the Gulf nation. Apart from that, lakhs of Indian professionals and workers have made the UAE their second home.   

The military attacks have heavily disrupted the shipping lines with the partial closure of the Strait of Hormuz. This is impacting key global supply chains and regional oil, gas, fertiliser, and sulphur exports. The Asian economies have been particularly grappling with supplies of crude and other associated products.

The overall situation suggests the UAE and Saudi Arabia, while aiming for a diplomatic solution to avoid economic fallout, are becoming more cautious in its stance toward Iran. Bahrain, having close ties with Saudi Arabia have adopted a similar approach too. On the other hand, Oman, Qatar and Kuwait favour diplomacy and have a more nuanced policy.  

Direct Dialogue

Pragmatism demands that Iran and the GCC states adopt a nuanced approach and engage in direct dialogue instead of brokered negotiations from capitals located far away.

Geography is the biggest deciding factor in geopolitics and geoeconomics. The geography of Iran remains intact. The geography of the Gulf states remains where it is.

Taking a cue from Muscat and now Doha, it is in the interest of both Riyadh and Abu Dhabi to open back-channel diplomacy with Tehran to dial down tensions. It is also imperative for Tehran to launch diplomatic dialogue with both Saudi Arabia and the UAE.

Loss of confidence in each other will hurt supplies of energy products globally and adversely impact the economies of Iran as well as the Gulf States. Confidence-building measures are the need of the hour.      

(The writer is a commentator on geopolitics and geoeconomics. Views expressed are personal.)