President Trump’s comments on Gaza risk straining relations with the Gulf and will work against his aim of expanding the Abraham Accords to include a normalisation of Saudi-Israel relations. Meanwhile, the resumption of the “maximum pressure” campaign on Iran by the US could present additional cover for the Gulf states to raise oil output more quickly and recapture market share. Finally, with a potential universal tariff in Trump’s trade war edging closer, US Fed rate cuts appear off the table. By virtue of their dollar pegs, central banks in the Gulf won’t lower interest rates either, presenting a downside risk to our growth forecasts.
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