Sanctions or Missiles? Why Gulf Nations Remain Wary of Washington's New Iran Strategy

Nearly six months since the United States and Israel launched the first missiles in their war on Iran, Washington is pivoting to a strategy of tougher sanctions and economic isolation in a bid to force Tehran to accept its terms for a peace deal. On Monday, US Treasury Secretary Scott Bessent announced “Operation Economic Outcast,” targeting Tehran’s remaining sources of revenue while also threatening penalties against those who continue doing business with Iran. Bessent described the latest wave of sanctions as “the single greatest financial offensive ever” against Iran, and warned that banks and businesses would share in Iran’s isolation if they refuse to cooperate. “No one is above the reach of US sanctions,” he told reporters.

Gulf states have repeatedly found themselves caught in the crosshairs during the US-Iran war as Iran has targeted US military assets and infrastructure in neighbouring countries. Economic pressure may appear preferable to another round of US and Israeli missile strikes. But analysts warn the strategy carries its own risks, with Iran potentially responding to mounting economic pressure by targeting more US assets and energy infrastructure across the region. Iran’s Secretary of the Supreme National Security Council Mohsen Rezaei said last week that if “any countries surrounding Iran join the Americans in their economic war, not a drop of oil will leave the Persian Gulf and the strait of Hormuz”. In peacetime, one-fifth of the world’s oil and natural gas is shipped by Gulf producers through the critical waterway, which has become the main bone of contention in the war since Iran effectively closed it to shipping at the start of the war.

Iran’s stance leaves Washington’s Gulf allies facing an uncomfortable paradox: the US military presence helps protect them from Iranian missiles and drones, but also makes their territories potential targets. Now, because of their security relationship with the United States, they are under increasing pressure to cut economic ties with Iran, which could provoke further Iranian retaliation and risk drawing them deeper into the conflict, experts say. While the United Arab Emirates (UAE) moved last week to decisively cut economic ties with Iran, other Gulf countries such as Saudi Arabia, Qatar and Oman may have different strategic calculations to make. Analysts say they have strong incentives to preserve diplomatic channels with Tehran and to push for a deal that could reopen the Strait of Hormuz.

Bessent described the US measures aimed at isolating Iran as “economic D-Day”. While the US and other countries have sanctioned Iran’s oil and financial sectors for decades, the latest wave will target five of Iran’s most important remaining economic lifelines: digital assets, technology, gold, aviation and shipping. Bessent also said Tehran’s trading partners are at risk of secondary sanctions if they continue helping turn Iranian oil into revenue. The Treasury imposed specific sanctions on 60 entities, vessels and individuals across the UAE, Hong Kong, China, Singapore and Switzerland, accusing them of facilitating Iranian trade.

However, Iranian political analyst Mostafa Khoshcheschm dismissed the announcement as a “political show” intended to intimidate Iran’s neighbours. He compared the campaign with Trump’s “maximum pressure” policy during his first term as US president, which was aimed at forcing Iran to renegotiate the US President Barack Obama-era Joint Comprehensive Plan of Action (JCPOA) on its nuclear programme. That, Khoshcheschm noted, failed – ending with Trump withdrawing the US from the agreement instead in 2018. The latest measures, the analyst argued, are “even weaker than that”.

The ramped-up emphasis on economic pressure comes as months of war have failed to produce a decisive outcome for the US, contrary to Trump’s indications at the start of the war that it would last for a matter of weeks. Meanwhile, US media reports that supplies of missiles and air defence interceptors in the Middle East may be running low – vehemently denied by the Trump administration – have incentivised Washington to pursue other means of pressuring Tehran, observers say.

The disruption to energy exports in the Strait of Hormuz has sent gas prices soaring in the US, making the war even more unpopular at home, even though efforts to establish alternative shipping routes have helped mitigate some of the economic fallout, experts say. Despite this, Washington appears to believe the economic balance is in its favour. Trita Parsi, executive vice president of the US-based Quincy Institute for Responsible Statecraft, said Washington calculates that rerouting maritime traffic through Oman – combined with a wider shift away from Gulf oil – has reduced the effectiveness of Iran’s closure of the Strait of Hormuz, while the US blockade has sharply constrained Tehran’s ability to sell its oil.

The UAE has already moved further than its Gulf neighbours, with Abu Dhabi saying last week it was ending trade with Iran. Miad Maleki, an Iran analyst at the pro-Israel think tank the Foundation for Defense of Democracies, said a comprehensive UAE financial and trade cutoff, if enforced, “may be the most consequential economic action of this war for Iran”, potentially exceeding the impact of the US embargo. Simon Mabon, professor of international relations at Lancaster University, told Al Jazeera that the UAE’s position reflects both its experience of Iranian attacks during the conflict and its increasingly close security relationship with Washington and Israel.

Meanwhile, other neighbours like Qatar, Oman, and Saudi Arabia navigate their own strategic calculations, balancing relations with Washington against the threat of severe Iranian escalation and regional instability.