In the face of escalating conflict in the Middle East, Saudi Arabia finds itself navigating a precarious path. Following the onset of a US-led campaign against Iran on 28 February, Riyadh has largely opted for a measured response. However, with recent attacks from multiple fronts, the Kingdom is now grappling with the dilemma of whether to retaliate further or seek de-escalation through negotiation or compensation.
The Growing Threat Landscape
To understand Saudi Arabia’s current predicament, it is essential to contextualise the ongoing hostilities engulfing the region. The conflict primarily pits Iran and its affiliates, including the Islamic Revolutionary Guards Corps (IRGC), against a coalition of the United States, Gulf Arab states, and Jordan. Key players on the Iranian side include the Houthis in Yemen, who have controlled significant territory since 2014, and the Popular Mobilisation Forces (PMF) in Iraq, which has reportedly launched numerous drone strikes targeting Saudi Arabia. Meanwhile, Hezbollah in Lebanon remains a formidable yet relatively dormant force.
In recent weeks, Iran has intensified its drone and missile strikes across the Gulf, targeting nations such as Jordan, Kuwait, and Bahrain, while also threatening commercial shipping in the vital Strait of Hormuz. This increase in aggression hints at a deteriorating security environment that could spiral into broader hostilities if a sustainable peace agreement remains elusive.
Saudi Arabia’s Dilemma: Deterrence vs. Diplomacy
Crown Prince Mohammed Bin Salman, who spearheads the Kingdom’s ambitious Vision 2030 initiative, is acutely aware of the stakes involved. This long-term plan aims to diversify Saudi Arabia’s economy away from its traditional reliance on oil and foster a dynamic, job-creating domestic industry. However, the ongoing regional instability poses a significant obstacle to attracting foreign investment and developing critical infrastructure like data centres, which are increasingly vulnerable to drone attacks.
The memory of the devastating drone strikes on Saudi oil facilities in September 2019 lingers heavily. Those assaults, launched by an Iranian proxy militia, temporarily crippled half of the Kingdom’s oil exports, highlighting the vulnerability of its critical infrastructure. Recent satellite imagery indicated renewed strikes on the Abqaiq oil facility, raising alarms about the potential for further disruptions to the economy.
The Oil Factor: Economic Implications of Ongoing Conflict
Oil remains the cornerstone of Saudi Arabia’s economy, and any sustained threat to its production capabilities could have far-reaching consequences. Following Iran’s retaliation against US and Israeli actions in February, Riyadh sought to secure its oil supply routes by maximising exports through its east-west pipeline to the Red Sea. This effort, however, does not eliminate the risk posed by the Houthis, who have recently escalated attacks on Saudi shipping in the Red Sea, further complicating oil export logistics.
The backdrop of the ongoing conflict in Yemen adds another layer of complexity. After years of military engagement, Saudi Arabia reached an uneasy truce with the Houthis in 2022, with reports suggesting financial settlements to ease tensions. Yet, the resurgence of drone strikes from the south, coupled with threats from Iraqi militias, has reignited fears of a prolonged conflict that runs counter to the aspirations outlined in Vision 2030.
Navigating a Complex Future
Saudi Arabia’s leadership faces a crucial juncture—whether to continue its retaliatory strikes or pursue diplomatic avenues to defuse tensions with its adversaries. The Crown Prince is likely weighing the long-term implications of each option, especially as the region grapples with complex geopolitical dynamics that could reshape alliances and alter the balance of power.
Why it Matters
The unfolding situation in the Gulf is not merely a regional concern; it has significant global implications. As Saudi Arabia attempts to maintain stability while pursuing its economic transformation, any escalation in conflict could disrupt oil markets and impact economies far beyond the Middle East. The Kingdom’s choices in the coming weeks will not only influence its own future but will also resonate across international borders, highlighting the intricate web of geopolitical relations that define today’s world.
