Commentary: How the US-Iran war will reshape the Gulf

The Iran war has triggered intense debate about America’s role in the region, but the reality is the Gulf has no substitute for the United States, says NUS Middle East Institute chairman Joseph Liow.

SINGAPORE: Barely a month after a preliminary agreement seemed to offer some respite from the war, attacks between Iran and the United States have resumed and are escalating dangerously. The US has struck Iran over consecutive nights, while Tehran retaliated by attacking US military facilities elsewhere in the Gulf. After at least two US soldiers were killed in Jordan over the weekend, US President Donald Trump on Monday (Jul 20) vowed that Iran would “pay … many times over”.

Regardless of who ultimately claims victory in this war, the geopolitical forces this war has unleashed will reshape the Persian Gulf and the wider region for years to come.

The resumption of hostilities threatens to further upend a regional order in the Persian Gulf - one that had been predicated on America’s provision of deterrence for its allies, the de-escalation of longstanding Arab-Iranian tensions and a focus on economic priorities.

CHALLENGING THE GLOBAL COMMONS

The greatest system‑wide shock has been immediately felt by the world: the closure of the Strait of Hormuz. But Tehran’s ability and willingness to shut or condition transit is a potential game‑changer for the future.

The narrow waterway between Iran and Oman serves as the main artery connecting Gulf energy exporters to global markets. About 20 per cent of the world’s oil and liquefied natural gas usually passes through it.

Iran has already signalled the strait will not return to the pre-war status of “free and open” passage. Together with Oman, it has floated a plan that will likely include charges for transit.

Mr Trump briefly countered with a US fee for protecting shipping. Though he walked back his remarks the next day, they underscored a harder reality: Transit regimes can be weaponised.

Nor will the concern be on Hormuz alone. Bab el‑Mandeb, which runs from the Red Sea to the Gulf of Aden thereby connecting Europe and Asia via the Suez Canal, could also be at risk if Iran mobilised Houthi allies in Yemen to disrupt passage.

On Monday, the Houthis declared a maritime blockade of Saudi Arabia, with whom they are already locked in an ongoing conflict that predates the Iran war. While it is not yet clear how damaging this move will be, it should be noted that they had already previously attacked commercial shipping in the Bab el‑Mandeb.

The prospect of recurrent disruption is thus redrawing the region’s energy map. Gulf producers are accelerating routes that bypass the Strait of Hormuz.

Saudi Arabia is expanding its East-West pipeline to the Red Sea port of Yanbu and opening capacity to neighbours such as Kuwait. But that flow could be placed at risk were hostilities to spill over to Bab el‑Mandeb, which accounts for the transit of 7 per cent of global oil.

The United Arab Emirates’ Habshan-Fujairah pipeline, which skirts the Strait and allows exports from the Gulf of Oman, has acquired greater strategic weight even as Abu Dhabi fast-tracks a parallel pipeline.

A WEAKENED BUT EMBOLDENED IRAN

Such investments in infrastructure will persist even after the war ends, because the war has not neutralised Iran as the Gulf’s central security challenge.

Iran has been hurt but not broken. Its economy is straining, uranium enrichment set back, missile stockpiles almost exhausted and regional proxies weakened. Yet has coercion weakened Tehran sufficiently that it has been, in Mr Trump’s words, left “without cards” at the negotiationg table?

So far, Tehran shows no sign of capitulating despite President Trump’s threats. Instead, Iranian leaders have been very clear about their strategic priority: to tighten control of the Strait of Hormuz, a prize now arguably more valuable than nuclear threshold status.

Iran may be weakened, but it is also emboldened and will not accept a diminished role in the region. Over time, Tehran will tighten its grip on the Strait while rebuilding proxies, missiles and enrichment capability.

THE FUTURE OF US ROLE

This is why the Gulf has no substitute for the US.

The war has triggered intense debate about America’s role. In the Gulf, many still view the United States as a resident - not offshore - power, reflected in more than two dozen bases and installations across the region. But those bases also became targets, leading others to consider if deterrence failed and if Gulf capitals must reassess their reliance on Washington.

Yet the reality is that Gulf states will need deterrence capabilities and security guarantees which only the US can provide. Neither China nor Russia is willing or able to act as the region’s security balancer, and contributions from middle powers will be episodic (and limited) at best.

Saudi Arabia, Egypt, Türkiye and Pakistan, known collectively as the Regional Four (R-4), have made an effort to create some form of security arrangement. This could be a useful vehicle for conflict management, but only the most optimistic will believe that anything resembling an alliance will come out of it.

Gulf leaders recognise this. Doubtless, they will diversify ties to widen strategic space, but they remain heavily reliant on the US. If anything, they will double down on defence cooperation by using their immense wealth and market access to keep Washington engaged.

Gulf Arab states have not been able to build a robust, collective security framework of their own. They have differing threat perceptions, lingering historical mistrust and a lack of robust institutional mechanisms.

Until those gaps close, only the United States combines the capabilities, networks and political relationships to deter aggression, underwrite maritime security, and manage escalation - however imperfectly - for the foreseeable future.

WHERE THIS LEAVES THE REGIONAL ORDER

In the coming months, the Gulf’s priorities will continue to be energy rerouting and redundancy. Pipelines and terminals that bypass the strait will attract capital and regulatory priority, gradually reducing - but not eliminating - Hormuz exposure.

As Tehran seeks to institutionalise control over Strait traffic, this will create a recurring source of friction and bargaining that others must price in. It will also seek periodically to assert that control, which means some degree of low-level hostilities will continue.

The US role in the region will deepen, even if it takes a more blatant transactional approach to security provision in the short term. Already, the bill for America’s war of choice in Iran has cost US$37.5 billion and that number will continue to increase. Mr Trump will likely look to Gulf allies to cover a good chunk of that outlay.

All this is to say that however the Iran war ends, the changes it has set in motion will surely outlast it.

Joseph Chinyong Liow is Chairman of the Middle East Institute, National University of Singapore and Dean and Wang Gungwu Professor in East Asian Affairs, Lee Kuan Yew School of Public Policy.