Persian Gulf Gamble: How Trump’s 2025 Energy & Tech Contracts with Arab States Face Annihilation in an Iran Conflict

As diplomatic tensions reach a boiling point, multibillion-dollar U.S. agreements for AI, energy, and security hang in the balance, threatened by the very regional war they were designed to transcend.

Image Credit:  The New York Times https://www.nytimes.com/2025/05/13/world/middleeast/trump-saudi-economic-forum.html

In May 2025, a high-profile tour of the Persian Gulf by U.S. President Donald Trump yielded a suite of ambitious contracts with Saudi Arabia, the United Arab Emirates, and Qatar, centered on artificial intelligence, energy expansion, and advanced technology. These deals, emblematic of a new U.S. strategy that treats the Gulf as an economic and technological platform rather than just a security commitment, are now caught in the crossfire of escalating U.S.-Iran tensions. This analysis details how a direct kinetic conflict between the United States (potentially with Israe.l) and Iran would trigger immediate and catastrophic retaliation against the energy and technological infrastructure of Gulf Arab states. Such an attack would not only incinerate the physical foundations of these newly signed contracts but would also obliterate the stable environment upon which long-term economic partnerships depend, rendering paper agreements worthless and forcing a fundamental recalculation of American strategy in a region it can neither control nor afford to abandon.

A Tense Pivot: Diplomacy and Drones in the Shadow of Conflict

The Persian Gulf in early 2026 is a region balanced on a knife’s edge. On February 3, 2026, Iranian President Masoud Pezeshkian announced he had instructed his foreign minister to “pursue fair and equitable negotiations” with the United States. This overture, a potential sign of Tehran seeking a diplomatic off-ramp, was immediately juxtaposed with a stark military incident: a U.S. Navy F-35C fighter jet shot down an Iranian Shahed-139 drone that was “aggressively approaching” the aircraft carrier USS Abraham Lincoln in international waters.

This clash encapsulates the current volatile dynamic. The White House confirmed that Special Envoy Steve Witkoff is still scheduled for talks with Iranian officials in Turkey, with the foreign ministers of Oman, Pakistan, Qatar, Saudi Arabia, and the UAE also invited. However, the substance of any negotiation is fraught. The Trump administration has included demands regarding Iran’s nuclear program, support for proxies, and ballistic missiles—issues that were central to the collapse of talks in June 2025, which then precipitated a 12-day war between Israe.l and Iran.

This oscillation between talk and confrontation defines the landscape in which major international contracts must operate. The Gulf Cooperation Council (GCC) states, caught between their powerful American partner and a formidable Iranian neighbor, face an existential dilemma. Their ambitious economic futures, underpinned by the very deals signed with Trump, require sustained peace and stability. Yet their security is inextricably linked to a U.S. strategy that currently entertains military escalation as a viable tool of policy.

The 2025 Contract Bonanza: AI, Energy, and Strategic Reassurance

President Trump’s May 2025 Gulf visit was more than a diplomatic tour; it was a deal-making mission that crystallized a new phase in U.S.-Gulf relations. Moving beyond the traditional framework of arms-for-security, the new agreements focused on intertwining American technological supremacy with Gulf capital and strategic vision.

Artificial Intelligence and Technology Partnerships: A centerpiece of the new relationship is collaboration on artificial intelligence. The U.S. and UAE agreed on a “U.S.-UAE AI Acceleration Partnership” to expand cooperation on critical technologies. Saudi Arabia’s Public Investment Fund partnered with Google Cloud to build an AI center near Dammam. These projects are not mere investments; they are foundational to the Gulf’s post-oil diversification plans, encapsulated in visions like Saudi Arabia’s Vision 2030. However, they are phenomenally energy-intensive, requiring massive and reliable power infrastructure to support data centers and computing capacity.

Energy Expansion and Know-How: Despite their vast reserves, Gulf states continue to seek U.S. expertise to maximize efficiency and expand production. Contracts were signed with leading U.S. firms for oil production expansion, liquefied natural gas (LNG) collaboration, and implementing AI solutions within the energy sector. These deals help Gulf national oil companies maintain their edge in a competitive global market increasingly pressured by U.S. shale output.

The Strategic Context of the Deals: These contracts were signed under the umbrella of Trump’s revised National Security Strategy (NSS), which “redefines” the Middle East rather than downgrades it. The NSS frames the region as a zone of partnership, innovation, and capital exchange, expecting capable regional actors like Saudi Arabia and the UAE to assume greater responsibility for their own security. The deals are thus a form of strategic reassurance—providing the Gulf states with the technological and economic tools for their future, within a framework where the U.S. remains the ultimate security backstop but is less inclined to deploy large-scale, permanent forces.

*Table: Key U.S.-Gulf Contracts and Partnerships (2025)*

 The Iranian Retaliation Toolkit: How Persian Gulf Infrastructure Becomes the Battleground

In the event of a U.S. or U.S.-Israe.li strike on Iran—whether targeting nuclear sites, military leadership, or assets—retaliation against American allies in the Persian Gulf is considered a near-certainty. Iran’s military doctrine emphasises asymmetric warfare, leveraging precision missiles, wave of drones, naval tactics, and proxy forces to strike where it can inflict maximum economic and strategic pain.

Missile and Drone Arsenal: Iran possesses one of the largest inventories of ballistic missiles and drones in the Middle East. These systems are capable of reaching every capital and critical infrastructure node on the Arabian Peninsula. Unlike the restrained retaliation following the June 2025 strikes—where Iran targeted a U.S. base in Qatar but spared energy infrastructure—a conflict perceived as existential could trigger a “maximum pain” strategy. As analyst Greg Priddy notes, after years of “crying wolf,” the wolf may finally be at the door if the regime believes its survival is at stake.

Maritime Warfare and Chokepoints: The Islamic Revolutionary Guard Corps Navy (IRGCN) has a long history of harassing vessels and seizing ships in the crowded waters of the Persian Gulf and the Strait of Hormuz. Tactics could include swarming attacks by fast boats, limpet mine attacks on tankers, or even the seizure of commercial vessels. The strategic aim would be to create chaos in global oil markets by threatening transit through the Strait, through which roughly 18–19.5 million barrels per day (mb/d) of crude and refined products flow—25% of all seaborne oil trade. Even the threat of closure can cause insurance rates to skyrocket and tankers to divert.

Proxy Activation: Iran’s network of allied militias—the “Axis of Resistance”—provides additional retaliatory options. Yemen’s Houthis have demonstrated the capability to strike deep into Saudi Arabia and the UAE using drones and missiles, as seen in the 2019 attacks on Abqaiq and Khurais facilities. They have also disrupted shipping in the Red Sea via the Bab el-Mandeb strait. In a full-scale conflict, Iran could direct these proxies to escalate attacks on Gulf energy and desalination infrastructure simultaneously.

Critical Infrastructure at Risk: The Achilles’ Heel of the Persian Gulf Economies

The GCC states have invested trillions of dollars in world-class energy, industrial, and now technological infrastructure. In a conflict, these assets are not just targets; they are the center of gravity for the Gulf’s economic survival and the realization of their visionary futures.

Energy Production Facilities: The crown jewels of the Gulf economies are their massive oil processing and export terminals. Facilities like Saudi Arabia’s Abqaiq (the world’s largest oil processing plant) and Ras Tanura, the UAE’s Jebel Ali and Ruwais, and Qatar’s LNG export complexes are highly complex and difficult to harden completely. A successful attack using precision munitions or swarming drones could disable them for months, not days. As the Columbia Center on Global Energy Policy notes, a kinetic attack scenario could remove not just marginal supply, but base supply, creating a deep physical deficit in global markets.

The Strait of Hormuz: This narrow waterway is the irreplaceable lifeline for GCC oil and gas exports. While Iran has often threatened its closure, it has historically been reluctant to fully block it, as doing so would also halt its own exports. However, “Iran will only likely close the Strait if it can no longer export oil as a consequence of damage to its critical output or export infrastructure”. In a “for-all-the-marbles” conflict, this calculus could change. The UAE’s port of Fujairah, located outside the Strait on the Gulf of Oman, and Saudi Arabia’s East-West Pipeline offer only limited bypass capacity and would themselves become high-value targets.

The New Technological Spine: The AI data centers, cloud regions, and tech parks that are the focus of the new U.S. partnerships are particularly vulnerable. They require continuous, uninterrupted power and cooling, and are sensitive to cyber-physical attacks. A missile strike on a power station could knock a data center offline; a cyberattack could corrupt or destroy the data and models within. The “U.S.-UAE AI Acceleration Partnership” is predicated on stable, secure, and resilient infrastructure—conditions utterly incompatible with a regional war.

Table: Persian Gulf Chokepoints and Vulnerabilities

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Economic Apocalypse: From Contracts to Catastrophe

The economic consequences of a regional conflagration would be immediate and severe, transforming the landscape from one of partnership and growth to one of triage and ruin.

Oil Price Shock and Market Chaos: Analysts estimate that a direct conflict involving strikes on infrastructure could send oil prices soaring from the mid-$60s into the $80-$100 per barrel range or higher in the short term. This spike, however, would not be the boon for GCC treasuries that past shocks have been. First, a significant portion of their export capacity would be physically destroyed or blockaded. Second, such extreme volatility and physical insecurity would trigger a flight of capital and talent, undermining the decades-long project of economic diversification. As the Columbia analysis warns, “even a short-term price spike stemming from a US–Iran conflict would jeopardize the foundations of non-oil growth and diversification”.

Collapse of the Non-Oil Economy: The GCC has made remarkable progress in growing its non-oil sectors, with the IMF estimating non-oil GDP growth at 3.7% in 2024. Tourism, logistics, finance, and technology—all central to Vision 2030-style plans—are hypersensitive to perceptions of safety. The 2025 tourism boom in Saudi Arabia (102% growth in Q1 2025 vs. Q1 2019) would evaporate overnight. The vibrant expatriate communities that drive consumption and services would begin emergency evacuations.

Financial and Fiscal Crisis: Gulf states have financed recent budget deficits through borrowing. Goldman Sachs estimates that a $10 swing in oil prices moves the aggregate GCC deficit by about 2% of GDP. A war would simultaneously spike borrowing needs (for emergency spending and reconstruction) while damaging the fiscal base and potentially increasing risk premiums on sovereign debt. Funding for the very diversification programs that the U.S. contracts support would be abruptly diverted to security and humanitarian needs.

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Strategic Implications for the United States: A Self-Defeating Strategy?

The incineration of Gulf infrastructure and the annulment of American contracts would represent a profound strategic failure for the United States, calling into question the core tenets of its current Gulf policy.

The Contradiction of “Burden-Shifting”: The Trump NSS explicitly expects GCC states to become “regional security providers” and take primary responsibility for deterring Iran. However, by initiating or supporting a conflict that provokes an overwhelming Iranian retaliation, the U.S. would be exposing its partners to catastrophic damage they are fundamentally incapable of absorbing alone. This would shatter the credibility of the burden-shifting model, revealing that when high-end conflict arrives, the Gulf states remain devastatingly vulnerable and dependent on direct U.S. protection—the very dependency the strategy seeks to reduce.

Energy Dominance Undermined: A core pillar of U.S. strategy is “energy dominance”—ensuring affordable, reliable energy for itself and its allies. A war that paralyzes Gulf production would trigger a global recession, harming the U.S. economy and straining alliances with oil-dependent partners in Asia and Europe. It would also validate the warnings of those who argue that U.S. energy independence is not a substitute for global energy market stability.

The China Opportunity: A devastated, insecure Gulf would look for partners willing to invest without political preconditions and capable of providing an alternative security framework. China, already the top destination for GCC exports, is the obvious candidate. Beijing’s model of apolitical investment and its growing naval presence in the Indian Ocean could appear increasingly attractive to Gulf rulers who feel abandoned or endangered by a mercurial American ally. The U.S. would risk achieving its goal of focusing on great-power competition with China by accidentally handing China a strategic victory in the Gulf.

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The Gulf States’ Dilemma: Between American Patronage and Iranian Retaliation

Persian Gulf leaders are not passive observers in this drama. Their recent actions reveal a deep anxiety and a concerted effort to steer Washington away from war.

Active Diplomatic Mediation: The invitation of foreign ministers from Oman, Qatar, Saudi Arabia, and the UAE to the proposed U.S.-Iran talks is not incidental. These states are actively lobbying for a diplomatic solution. They have witnessed the U.S. offer unprecedented security assurances to Qatar following an Israe.li strike and recognize that in a wider war, such guarantees would be tested beyond breaking point. Their message to Washington is clear: “neither [Saudi Arabia nor the UAE] has an interest in a US attack on Iran, particularly one launched from their own territory, given the risk of Iranian retaliation on their domestic energy infrastructure”.

The “Last Man Standing” Economic Strategy: Analytically, Persian Gulf states are pursuing a “last barrel” strategy—using hydrocarbon revenues today to build post-oil economies for tomorrow. This long game requires decades of stability, not episodic shocks. As one analysis framed it, their internal state-building programs are “predicated on zero problems with their neighbors”. A war with Iran is the antithesis of this strategy, threatening to burn down the future they are building with American technology and partnership.

A Recalculation of Alignments: The complex reaction to the Israe.l-Hamas war is instructive. While GCC states have an entrenched rivalry with Iran, they have also pursued detente (like the Saudi-Iran deal mediated by China) and have been alarmed by what they see as Israe.l’s destabilizing “regional revisionism”. Their primary interest is stability for development. If American policy is seen as enabling Israe.li actions or directly provoking Iranian responses that destroy that stability, the foundational alignment with the U.S. could undergo a slow but significant erosion.

Diplomatic Off-Ramps and the Fragile Path to Preserving Gains

The current flurry of diplomatic activity, however tense, indicates that all major actors perceive the costs of war as prohibitively high. This creates a narrow pathway to salvage the strategic and economic projects underway.

The Limited Deal Scenario: Experts are skeptical of a grand, comprehensive nuclear deal. However, a limited, transactional agreement might be possible—for example, Iran shipping out its stockpile of 60% highly enriched uranium in return for limited sanctions relief and access to frozen assets. While such a deal would do little to address Iran’s regional behavior or long-term trajectory, it could defuse the immediate crisis and create space for the regional diplomacy Gulf states champion.

The Role of Gulf Mediators: Oman, Qatar, and others are positioned as essential honest brokers. Their success in facilitating U.S.-Iran de-escalation would not only avert disaster but would also reinforce their own centrality and demonstrate the value of the partnership model envisioned in Trump’s NSS. It would prove that Gulf states can be providers of security through diplomacy, not just through military capacity.

Re-framing the Partnership: The ultimate test is whether Washington and Gulf capitals can align their strategic clocks. The U.S. seems focused on near-term coercive diplomacy to address the nuclear file. The GCC is focused on long-term economic transformation. The 2025 contracts are a bridge between these timelines. To preserve them, the U.S. may need to prioritize conflict management and de-escalation—even with an unsavory regime in Tehran—over escalation. As the Atlantic Council notes, the military risks of striking Iran likely “outweigh elusive rewards” and risk “unknown regional implications”.

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Conclusion: Paper Promises in a Firestorm

The contracts signed amidst the fanfare of President Trump’s 2025 Gulf visit represent a bold vision: a transition from a U.S.-Gulf relationship based on oil-for-security to one based on technology-for-future-building. Yet, this vision is written on parchment that is acutely flammable. It depends entirely on a stable geopolitical environment in the world’s most volatile region.

A U.S.-Iran war would be the firestorm that consumes that parchment. The sophisticated AI data centers, the expanded energy projects, the very cities being built for a post-oil future—all are hostage to Iranian missiles and drones. The GCC states know this, which is why their diplomats are working overtime to douse the flames of confrontation. The fundamental question for the Trump administration is whether the perceived benefits of pressuring Iran—whether on nuclear issues, protests, or regional behavior—are worth incinerating the tangible, multibillion-dollar foundations of a new partnership architecture.

In the final analysis, the value of a contract is not in its signatures but in the mutual benefit it delivers over time. If American strategy leads to a war that destroys the partner’s ability to fulfill their end of the bargain, then the contracts become mere historical curiosities. The United States would then face a Gulf region that is not only physically shattered but also strategically alienated, forced to rebuild its future with partners whose actions are less likely to invite an apocalypse. The road away from this outcome runs not through carrier groups and ultimatums, but through the painstaking, unglamorous work of diplomacy that the Gulf states themselves are desperately trying to facilitate. The survival of their—and America’s—strategic investment depends on it.

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