The memorandum of understanding signed on June 17 between the United States and Iran leaves the Gulf states facing a strategic landscape they did not create and cannot control. Iran’s nuclear program remains unaddressed rather than dismantled. Its ballistic missile arsenal is not mentioned. Its proxy network, including the militias that spent months striking at Gulf infrastructure and civilian targets, is actively protected under the agreement’s Lebanon clause. For the six member states of the Gulf Cooperation Council, the accord signals that American protection is conditional and that the cost of failed deterrence will fall on them.
The scale of Iranian strikes on Gulf territory in recent months makes the public stakes concrete. Iran launched more than 4,000 projectiles against GCC member states in the weeks following February 28. Missiles and debris struck landmark buildings and airports in Dubai, high-rises in Manama, and Kuwait’s international airport. QatarEnergy halted liquefied natural gas production after Iran struck Ras Laffan, one of the world’s largest LNG facilities. Kuwait and Bahrain cut back oil production due to storage constraints and blocked export routes. The UAE’s air defenses engaged 537 ballistic missiles, 2,256 drones, and 26 cruise missiles, killing 13 people, injuring more than 200, and inflicting industrial damage estimated to take a year to repair. Iran deliberately targeted energy infrastructure, civilian airports, hotels, residential buildings, and the American military installations that these states had hosted as a demonstration of alliance with Washington.
The agreement commits the United States to work with regional partners to develop a plan with at least 300 billion dollars for Iranian reconstruction and economic development. Vice President JD Vance told CBS that the fund would be backed by Gulf states if Iran complies. President Donald Trump denied the United States would pay, calling such reports “fake news.” Secretary of State Marco Rubio, asked upon arrival in Abu Dhabi whether he would request Gulf financial contributions, said “No, that’s far down the road,” adding “It won’t be our investment. It won’t be our government money.” The fund appears in the agreement’s text. The United States has disclaimed responsibility for financing it. No alternative source of 300 billion dollars exists in the region other than the GCC states whose infrastructure Iran spent four months destroying.
Saudi Arabia’s foreign minister, Prince Faisal bin Farhan, made the Kingdom’s position explicit. He told the European Council on Foreign Relations in Vienna that he had “no details on this fund” and “no information or insight into the concept behind it.” He placed a precondition in front of any economic engagement with Tehran: “We’re going to have to have a conversation on how we rebuild that trust, how we rebuild that relationship before any concept of economic cooperation, mutual investment, or anything like that can rationally be addressed.” He noted that Saudi investment commitments “have already committed their funding streams to areas that are targeted at our domestic economy.” The message was plain. The Kingdom is not willing to pay.
The United Arab Emirates, which bore more than half of all Iranian projectiles targeting Gulf states and whose foreign minister declared in March that the UAE would not be “blackmailed by terrorists,” has since moved toward accommodation with a speed that reflects not a softening of its threat assessment but a hardening of its judgment about the limits of American protection. Abu Dhabi initially demanded Iranian reparations for damage to Emirati infrastructure. It then reportedly agreed to release between 10 billion and 20 billion dollars in frozen Iranian funds, with upwards of 3 billion dollars already transferred to Iranian channels, in exchange for a halt to attacks. The UAE issued a categorical denial of these reports. Whether or not the specific figures are accurate, the behavioral pattern is clear: the UAE joined the regional consensus in favor of the deal by June, having concluded that the American security guarantee is conditional, revocable, and ultimately subordinate to Washington’s domestic economic imperatives.
Some reports suggest that GCC states themselves facilitated and supported the ceasefire deal. Some Gulf governments preferred paying for de-escalation to enduring further Iranian strikes, having concluded that the cost of continued hostilities exceeded what their economies and populations could absorb. But whether the Gulf states are resisting the agreement’s financial terms or quietly accepting them as preferable to renewed war, the underlying calculus is identical: the American security framework failed to protect them from the consequences of a war they did not seek, and the costs of that failure are being transferred to them regardless of the form the transfer takes. When President Trump acknowledged at a press conference that he signed the agreement because he “didn’t want to see an economic catastrophe,” the Gulf states heard exactly what they feared: that the threshold at which the United States would seek accommodation with Iran was lower than the threshold at which the Gulf states would be made whole.
The agreement envisions the wholesale dismantlement of a sanctions regime constructed over more than four decades, beginning with the 1979 revolution and encompassing designations related to terrorism, missile proliferation, human rights abuses, and the Islamic Revolutionary Guard Corps’ status as a foreign terrorist organization. For the Gulf states, this matters as a question of strategic confidence. Saudi Arabia’s own accommodation with Iran, culminating in the Beijing-brokered rapprochement of 2023, and the financial channels that the UAE and Qatar maintained with Iranian counterparts throughout the sanctions period, suggest that Gulf capitals never treated the sanctions architecture as an absolute barrier. They valued it as a systematic constraint on Iranian power projection that limited Iranian access to the formal financial system, restricted arms procurement, complicated the financing of proxy networks, and signaled American resolve to contain Iranian expansionism, even as they selectively worked around it when their own interests required.
The promise of complete sanctions removal, absent any Iranian commitment to dismantle its proxy networks or curtail its ballistic missile program, communicates to Gulf governments that even the imperfect constraint they relied upon is being traded away in exchange for the reopening of a waterway that Iran closed in the first place. Regional analysts have warned that the release of frozen Iranian funds and the lifting of sanctions could “empower Tehran’s regional networks of militias and proxies, reinforcing the very threats the MOU was meant to contain.” The concern is that resources flowing to Tehran will be redirected toward the very instruments of coercion that the Gulf states have spent decades trying to neutralize, and that without the structural ceiling the sanctions provided, there will be nothing to prevent the reconstitution of Iranian power projection on a scale that predates the war.
The Strait of Hormuz presents the most immediate illustration of this threat. The agreement provides for the toll-free reopening of the strait but does not require the dissolution of the Persian Gulf Strait Authority, the formal regulatory body established by the IRGC in May 2026 that requires vessels to submit ownership, insurance, crew, and cargo information and receive a permit before transiting. The PGSA continues to register ships for passage even during the toll-free period, consolidating its institutional presence while the ceasefire nominally suspends its revenue function. Meanwhile, the future governance of the strait is being negotiated on a track that excludes most of the Gulf states whose economies depend on it. Iran’s Parliament Speaker Mohammad Bagher Qalibaf and Foreign Minister Abbas Araghchi traveled to Oman this week to discuss “new arrangements to manage” the strait bilaterally, and Qatar’s Prime Minister separately visited Muscat for talks with Oman on initiating negotiations involving Iran, Iraq, and Gulf states on Hormuz, discussions explicitly separate from the U.S.-Iran peace talks. The Council on Foreign Relations has noted that Oman may benefit from joining Iran in collecting a toll, creating a bilateral Iranian-Omani governance structure over a waterway on which Saudi Arabia, Kuwait, Bahrain, and Qatar depend for their economic survival.
When Saudi Foreign Minister Prince Faisal was asked about the new arrangements at Hormuz, he rejected the premise outright: “The management of the strait was working fine before the conflict. There were no issues. Ships were navigating freely. Why should we now, as a result of a conflict, accept some novel arrangement that is going to be imposed on it?” Secretary Rubio reaffirmed that “no country is allowed to charge tolls or fees on an international waterway” under existing international law. The declaratory position is clear. The institutional reality on the ground is moving in the opposite direction. If this institutional fact survives the negotiating period, Iran will have acquired through the war a permanent lever of economic coercion over every major Gulf energy exporter whose access to global markets remains exposed to Hormuz.
The Lebanon addition to the agreement compounds all previous concerns. The accord promises the “immediate and permanent termination of military operations on all fronts, including in Lebanon,” and Iran’s foreign minister has declared that any continued Israeli military presence in Lebanon constitutes a violation of the agreement, a claim that goes beyond the ceasefire language in the text, which does not address territorial withdrawal. Israel has stated that it does not consider itself bound by this provision. Secretary Rubio, when asked about Lebanon during his Gulf tour, described the Lebanon track as “separate” from the Iran deal, to be negotiated directly with the Lebanese government, a framing difficult to reconcile with the agreement’s explicit inclusion of Lebanon in its ceasefire terms. Iran’s inclusion of Lebanon in the accord, and Washington’s acceptance of that linkage, signals that Iran’s proxy architecture survived the war intact as a negotiating asset. If Tehran can compel American pressure on Israel to cease operations against Hezbollah as a condition of a ceasefire with the United States, then the proxy network that directly threatens Gulf security, not only Hezbollah in Lebanon but the Houthis in Yemen and the Popular Mobilization Forces in Iraq, has been validated as a going concern. Iran’s success in including Lebanon in the agreement suggests that Tehran has no intention of resetting or reducing its regional ambitions, and this is among the principal concerns of Arab states evaluating the accord’s long-term implications.
Before the war, the Gulf security framework rested on a set of interlocking assumptions.