U.S. intervention in Iran and the intertwining of that conflict with Ukraine have triggered economic instability and geopolitical shifts, leading to a 4% rise in worldwide inflation and a forecasted 3.3% GDP contraction for Saudi Arabia, the sources report. These interconnected conflicts have disrupted global energy markets and eroded the security assumptions of key U.S. allies in the Middle East and Europe.
Saudi Arabia raises budget deficit to $65.3 billion
The economic fallout from the conflict in the Persian Gulf has forced Saudi Arabia to revise its financial outlook. On September 30, the Saudi government raised its 2026 budget deficit projection to $65.3 billion, an increase of 48% over the original forecast.
The International Monetary Fund (IMF) downgraded Saudi Arabia’s GDP growth forecast from 1.7% in July to a contraction of 3.3%. This shift follows the failure of assumptions underlying the kingdom’s Vision 2030 plan, which relied on open sea lanes and a U.S. security umbrella to deter threats to export infrastructure.
Did you know? Brent oil prices reached $117 per barrel shortly before the midterms, representing a 50% increase compared to prewar levels.
Trump’s Middle East policy triggers “forest fires”
Tom Barrack, a counselor to the president on the Middle East, admitted that the war on Iran launched in February produced unexpected consequences. Barrack likened the regional dynamics to a Rubik’s Cube, stating that a single move affects the entire picture, turning “camp fires into forest fires.”
European leaders distance themselves from Washington
The cost-of-living crisis in Europe has led leaders to explicitly blame U.S. policy for domestic instability. French President Emmanuel Macron stated that fuel prices and living costs are driven by the conflict launched in the Persian Gulf, a war in which France did not participate.
Polish Prime Minister Donald Tusk told parliament that fuel prices are “devilishly expensive,” attributing the responsibility to Donald Trump.
Russia proposes three-way summit in Shenzhen
Vladimir Putin has used the instability to propose a great power summit between China, Russia, and the U.S., scheduled for November 18 in Shenzhen, China. Russian Foreign Minister Sergei Lavrov visited Tehran on October 19 to determine if the Iran conflict could end on terms acceptable to the U.S. president.
Analyst Amir Chahaki stated that the Russian objective is to persuade Tehran to meet U.S. demands in exchange for concessions from Washington regarding Ukraine. To facilitate this, the U.S. is hosting Putin at a G20 summit at a Trump golf club near Miami this winter.
Strategic Insight: Oman’s Foreign Minister Badr Albusaidi recently called for a Gulf security pact that includes Iran, suggesting a shift away from the U.S. as the primary security provider for the region.
Iran adjusts defense doctrine for preemptive strikes
The conflict has entrenched hardliners in Tehran. Following the death of Ali Larijani on the first day of the war, the Islamic Revolutionary Guards Corps adjusted its doctrine to allow for preemptive strikes against U.S. bases and other global targets.
Why is Saudi Arabia's economy contracting?
Why is Saudi Arabia’s economy contracting?
The IMF forecasts a 3.3% contraction because the security assumptions of Vision 2030—specifically open sea lanes and a functional U.S. security umbrella—failed following the February escalation.
What is the status of the Starlink dispute?
When is the proposed great power summit?
Russia has proposed a three-way meeting between the U.S., China, and Russia to take place on November 18 in Shenzhen, China.
The next major diplomatic milestone is the proposed three-way summit in Shenzhen on November 18.
Worth a look