Will the Iran-US MoU reshape economic relations in the Gulf?
Submitted by
Zahra Ladha
on
Tue, 07/07/2026 - 09:52
The memorandum envisages sanctions relief and a reconstruction fund, but investors remain wary of security risks
A ship is seen through a fishing net in the port of Fujairah, UAE, near the Strait of Hormuz, 2 July 2019 (Karim Sahib/AFP)
Off
The Memorandum of Understanding (MoU) signed by the United States and Iran on 17 June could reshape the economic landscape of the Gulf by opening the door to renewed trade and investment with Iran.
Central to the agreement is a commitment to ease longstanding sanctions and integrate Tehran more deeply into regional economic networks.
The framework calls for the lifting of primary and secondary US sanctions on Iran and the establishment of a $300bn fund, backed by Washington and regional partners, to support the country's reconstruction and development.
For Gulf states that have long viewed Iran as both a neighbour and a commercial opportunity, the agreement could mark a significant turning point.
Qatar has already begun framing sanctions relief in commercial terms.
On the sidelines of the G7 summit, Emir Sheikh Tamim argued there would be “huge investment opportunities in Iran”, suggesting that some Gulf capitals see economic engagement as a potential dividend of successful diplomacy.
Yet sanctions are only part of the equation.
Months of direct Iranian missile and drone attacks on the GCC have reinforced longstanding security concerns, raising questions over how quickly economic engagement can expand.
However, the question about how Iran-GCC economic relations are likely to develop under the current MoU remains.
Ongoing constraints
Against the backdrop of the Iran-Saudi Arabia reconciliation in 2023, Riyadh seemed prepared to begin large-scale investment projects inside the Islamic Republic.
At the time, Saudi Arabia’s Finance Minister Mohammed al-Jadaan said that investments into Iran could happen “very quickly” following an agreement to restore diplomatic ties.
Saudi Arabia and its allies must curb the growing Israeli-Emirati axis
»
Nevertheless, such investment did not materialise, at least in part due to continued US secondary sanctions on Iran. The Iran-US MoU provides a framework to remove these hurdles.
The preliminary agreement calls for the removal of all US primary and secondary sanctions on Iran, and for the US to grant all licences, waivers and permissions required for financial transactions between Iran and the region.
Still, implementation will take time, according to Robert Mogielnicki, non-resident fellow at the Arab Gulf States Institute.
“Even under the rosiest of scenarios for Iran, the sanctions-related risks are not going to dissipate anytime soon,” he says.
Regional and international companies are likely to remain cautious of how durable any final US-Iran agreement would be.
Just three years after its signing, the US withdrew from the landmark Joint Comprehensive Plan of Action (JCPOA), widely known as the Iran nuclear deal, and reimposed sanctions on Iran, forcing multinationals including Boeing to exit the Iranian market almost overnight.
“It is important to remember that the fear of the US withdrawing from the JCPOA meant that international markets were hesitant to even lend money to Iran in the years before the US withdrew from the deal," said Ali Ahmadi, executive fellow at the Geneva Centre for Security Policy.
“The fact that these banking channels have been suspended for some time also means that re-establishing these financial links will not be fast or easy, especially for major global banks with significant dollar exposure,” Ahmadi added.
As a result, large-scale regional investment into Iran is likely to be gradual as both investor confidence recovers and the financial infrastructure to support cross-border transactions is rebuilt.
Existing trade between Iran and the region is likely to expand in the meantime, primarily in sectors such as consumer goods, electronics, automobiles, healthcare supplies, pharmaceuticals and construction materials.
“Much of the discussion focuses on Gulf trade hubs, but Iraq is also part of the conversation.
Iraq and the Kurdistan Region already facilitate high volumes of trade with Iran through established transport links, multiple border crossings and private-sector relationships," said Amanj Yarwaessi, director of MEED Foundation.
Security dynamics
The GCC appears prepared to engage diplomatically with Tehran, despite sustaining repeated Iranian drone and missile attacks against them since 28 February.
All six GCC member states welcomed the signing of the MoU in June, which was reached with the support of Qatari and Pakistani mediators.
War on Iran has triggered a fundamental crisis of trust in the nuclear non-proliferation treaty
»
Oman has engaged in talks with Iran over the management of the Strait of Hormuz, while Doha, Muscat and Riyadh sent delegations to former Supreme Leader Ali Khamenei’s funeral on 3 July.
“The GCC states are at the heart of the current negotiations,” said Mehran Haghirian, director of research at the think tank Bourse & Bazaar Foundation.
“Qatar and Oman are not just representing their own interests, but those of the GCC," he said.
This is in contrast to Iran’s relationship with some Gulf capitals before the war.
“Even after the UAE-Iran reconciliation, you had a situation where Dubai was expanding trade with Iran, while Abu Dhabi continued to perceive Iran as a threat to regional stability. Interestingly, the recent war has forced this tension into the open,” said Haghirian.
The recent war has also made it clear that the next phase of the Iran-Gulf rapprochement will depend on whether economic engagement can be matched by progress on regional security.
Foundations for integration
GCC member states are unlikely to commit to large-scale investment unless Tehran can reassure Gulf capitals that regional tensions will not escalate again.
Iran told Saudi Arabia it planned to 'crush the UAE': Report
»
“To realise the substantial benefits from Gulf investment and trade, it will need to show some contrition for the harm it has caused to the Gulf States, including killing nationals, and commit to non-aggression in the future,” said Justin Alexander, director of Khalij Economics.
But despite these security constraints, the commercial incentives for closer economic integration remain significant for both Iran and its Gulf neighbours.
Existing trade networks, longstanding business relationships and geographic proximity mean that regional economic integration would build on commercial links that already exist, rather than creating them from scratch.
“There are two decades of strong people-to-people business links in Iran and the GCC,” Haghirian said.
These links - spanning traders, logistics firms, distributors and investors operating across the Gulf and Iran - have created commercial networks that endured despite years of strained relations between Iran and its Gulf neighbours, and various rounds of US sanctions.
This provides a foundation on which broader regional economic integration could expand if financial and security constraints ease.
War on Iran
News
Post Date Override
0
Update Date
Mon, 05/04/2020 - 21:19
Update Date Override
0
