Middle East and North Africa (MENA)

The Memorandum of Understanding did not constitute a comprehensive or definitive settlement of the nuclear issue. Rather, it served as a temporary truce to freeze military strikes and maritime and nuclear threats, buying time to negotiate a comprehensive agreement that would address the enrichment crisis at its roots. These developments come in the wake of the collapse of the 2015 nuclear agreement following the United States' withdrawal in 2018, which gave Tehran considerable room to expand uranium enrichment, restrict international inspections and accumulate large quantities of uranium enriched to levels approaching those required for the production of a nuclear weapon.   Against this backdrop, the nuclear programme stands out as the Iranian leadership's principal bargaining chip. Although Tehran does not currently possess a nuclear weapon, it has accumulated the technical expertise, established the necessary infrastructure and secured the enriched uranium needed to produce one within a relatively short period should the political decision be taken to do so. This reality underscores that Iran's leverage at the negotiating table is no longer merely theoretical. It is tangible leverage, rooted in Tehran's ability to move rapidly towards weaponisation.   On the operational front, despite US and Israeli strikes targeting nuclear facilities inside Iran, assessments have confirmed only limited damage. Tehran is still strongly believed to retain substantial capacity to continue uranium enrichment. However, experts remain divided over the true extent to which the attacks have set back its nuclear programme. These assessments indicate that military action alone has failed to resolve the nuclear issue, naturally increasing the likelihood of an eventual resumption of negotiations and a return to the diplomatic track.   Against this complex backdrop, a fundamental question remains: will the terms governing the nuclear issue be revised in any future memorandum, or will they remain unchanged from those set out in the "Islamabad Memorandum"? If the parties move towards introducing new amendments, how far can each side go in making concessions to negotiate an end to this chapter?

While political capitals retain legal and sovereign authority, seaports have emerged as the "functional capitals" of the modern state. These maritime nodes are where sovereign decisions are translated into material reality, controlling the flow of energy, food, industrial inputs, and data. With 80% of global trade volume and 70% of its value moving by sea, the disruption of a major port can rapidly paralysise a nation's economy and military logistics, demonstrating that port power is highly consequential and systemic.   Port power is relational, depending on factors like geographic position, network centrality, industrial depth, and digital architecture. The global port network is highly concentrated, with less than 5% of ports handling half of the global maritime trade, creating a paradox where extreme efficiency leads to profound systemic vulnerabilities. This concentration makes ports susceptible not only to physical blockades or congestion but also to cyberattacks and climate change, necessitating robust resilience strategies.   Furthermore, foreign investment in port infrastructure carries significant geopolitical implications, moving beyond simplistic narratives of "debt-trap diplomacy". Long-term concessions and operational control can create strategic dependencies, even without outright asset confiscation. Additionally, modern ports possess a dual-use nature, where commercial facilities can provide latent military option value, blurring the lines between economic integration and naval expansion. Ultimately, true national power lies in the effective integration of the political capital's authority with the strategic port's physical capabilities.   This publication was written in August 2026

The largest technology firms are moving their data centres into low Earth orbit, having pushed terrestrial infrastructure to the physical and environmental limits of what it can supply in power, cooling and land to an artificial intelligence sector whose demands keep compounding. SpaceX has set the fourth quarter of 2027 for the launch of its first generation of computing satellites, targeting one gigawatt of orbital data centre power capacity in that same year and one hundred gigawatts by 2030. The scale of the pressure behind that schedule is visible in the wider market, where global data centre demand is estimated to require investment approaching €5.7 trillion before the decade closes.   What presents itself as an engineering migration is in substance a redistribution of sovereign authority. Moving processing beyond national territory removes technology firms from the reach of the data localisation rules, compliance regimes and tax frameworks that states have spent a decade constructing. For Arab states the challenge is immediate. Having invested heavily in domestic digital infrastructure and imposed strict data residency requirements, they now face the prospect that the server handling their citizens’ data sits five hundred kilometres overhead, beyond the enforcement reach of their courts.   This analysis therefore examines the economics of moving computation into orbit and the limits of its viability; traces the legal gap that allows technology firms to shelter behind the jurisdiction of the state of registry in order to avoid the laws of every other state; assesses the risks of monopolistic concentration and the environmental costs borne collectively; and identifies the regulatory instruments available to Arab states in defence of their digital sovereignty, chief among them the management of radio-frequency spectrum, satellite landing rights and the supervision of ground gateways.

The geopolitical and security complexities of land borders in the Middle East have created a strategic reality in which Israel effectively functions as an "island economy", despite its physical connection to the continental landmass. This overland isolation has left the Israeli economy with little choice but to rely almost entirely on maritime routes to sustain its trade arteries, secure vital imports and maintain the flow of exports. The sea, therefore, is no longer merely an additional geopolitical and military domain, but has become the lung through which the Israeli economy breathes.   In this context, geography has shifted from a potential defensive shield to a structural vulnerability, with any disruption to freedom of navigation or coastal security posing an existential threat to capital flows and market stability.   This strategic vulnerability is further compounded by the country's demographic and economic geography. The coastal strip constitutes Israel's true centre of gravity, concentrating much of its population, financial centres, logistics infrastructure and principal ports.   This concentration leaves the coastline particularly exposed. Any security disruption in the maritime domain would affect not only shipping, but also the very fabric of everyday life and the core of commercial activity. Non-state armed actors have recognised this dynamic and identified the maritime domain as an opportunity to inflict economic paralysis at extremely low cost, circumventing the need to penetrate Israel's sophisticated air and land defence systems.   The concept of maritime infrastructure is no longer confined to ships and ports, but has expanded to encompass sovereign assets that constitute pillars of contemporary national security. Natural gas fields beneath the Eastern Mediterranean have become a cornerstone of energy independence, with any threat to production platforms or pipelines having immediate repercussions for industrial production costs and electricity grid stability.   In parallel, subsea telecommunications cables have emerged as a lifeline for the digital knowledge economy. The high-tech and financial services sectors depend entirely on these cables' integrity to ensure the global flow of data. Protecting these subsea assets has therefore moved beyond the technical realm to become a core element of the security doctrine aimed at protecting the economy from collapse in times of crisis.   This maritime exposure confronts the military establishment with a dual strategic dilemma: a widening protection gap between the immediate coastline and distant international sea lanes.   At the near-shore tactical level, the challenges associated with protecting coastal installations from unconventional threats, such as explosive-laden boats and drones, are intensifying. Countering these threats entails enormous financial costs, requiring the operation of expensive interception systems and warships against low-cost offensive capabilities available to adversaries.   At the more distant strategic level, the challenge lies in protecting the vital trade routes running through the Red Sea and the Bab el-Mandeb Strait. Any disruption there could choke off the Port of Eilat, disrupt supply chains from Asia, and drive up insurance and shipping costs, dealing a severe blow to investor confidence and the broader business environment.

Food security has become one of the most consequential strategic questions facing the Arab world. Heavy reliance on imported grain, seeds, and agricultural inputs, combined with limited control over pricing and distribution, has left the region exposed to decisions made far beyond its borders.

On 24 August 2026, the US Treasury announced an economic enforcement campaign under the name Operation Economic Outcast, designating close to 60 entities, individuals and vessels and issuing five unprecedented sectoral determinations under Executive Order 13902.1 Treasury Secretary Scott Bessent described the campaign as a comprehensive economic onslaught intended to sever every artery feeding the Iranian economy, while Iran's Minister of Economy, Ali Madanizadeh, dismissed it as an act of economic terrorism, insisting that his country has its own instruments and knows the rules of the game.   The significance of the campaign extends well beyond the number of designations. Washington is shifting its weight away from penalising Iranian entities and towards pursuing intermediaries in third countries: independent Chinese refineries, Gulf trading and exchange houses, and settlement channels operating outside the dollar. Yet the record since 2012 reveals a pattern that is close to invariable: sharp friction imposed from the American side, followed by structural Iranian adaptation, in which Iranian exports survive and the American stock of coercive power erodes.   This analysis therefore sets out to dissect the legal architecture of the campaign and identify what is genuinely new within it, then to test its six enforcement tracks against the structural obstacles Tehran has accumulated across four successive waves of sanctions, and finally to estimate the likely impact on the volume of Iranian exports, on the discount imposed on its crude and on the price path, while measuring the cost of compliance that financial and logistics hubs will have to absorb.

The expiry of the 60-day timeframe stipulated in the Memorandum of Understanding has left the Middle East facing an exceptionally complex geopolitical vacuum, following the failure to forge a strategic agreement that would either defuse tensions or secure the full reopening of the Strait of Hormuz. This does not necessarily signal a sudden or dramatic collapse in negotiations. Rather, it raises a fundamental strategic question about what comes next. The region appears to be entering a calculated tactical transition from conventional diplomacy to a bitter phase of brinkmanship and mutual attrition between Washington and Tehran. As a result, maritime security in one of the world’s most vital waterways, through which approximately 21 million barrels of oil pass each day, equivalent to 20% of global oil consumption, together with around 20% of global liquefied natural gas trade, is increasingly subject to volatile political calculations.   Understanding US conduct in this crisis requires a careful examination of two seemingly contradictory, yet ultimately complementary, perspectives. President Trump’s insistence that there is no pressing timetable for resolving the crisis can be understood as part of a broader doctrine of tactical manoeuvre. Washington is effectively weaponising time to exert systematic economic pressure, sustained by the continuing naval blockade of Iranian ports and an intensification of sanctions. The strategic objective is to drive the Iranian economy towards breaking point and compel Tehran to make substantive concessions, while sparing the US the costs and risks of an open military confrontation. A parallel and more probing assessment, however, suggests that this tactical calm conceals a classic dilemma that sharply constrains US options. Full-scale military escalation would carry prohibitive security and financial costs, potentially driving maritime insurance premiums and energy futures into double-digit surges and placing global supply chains at risk. Yet acquiescing to Tehran’s terms would effectively subordinate international navigation to Iranian will. The current stalemate therefore amounts to little more than an enforced freeze, reflecting institutional frustration at the absence of effective surgical solutions.   On the other side of the strategic equation, Tehran has been far from a passive recipient of pressure. Instead, it has devised a counter-strategy that seeks to redefine the rules of engagement and weaponise geography as a potent source of negotiating leverage. In a particularly consequential move, Iran has succeeded, at least temporarily, in shifting international attention away from the complexities of its nuclear ambitions and uranium enrichment programme, while exploiting maritime chokepoints as an instrument of immediate coercive pressure. Tehran has transformed control over the flow of global trade through the Strait of Hormuz into a decisive bargaining instrument, demonstrating its ability to disrupt global geoeconomic calculations. Iran’s brinkmanship is clearest in the far-reaching conditions it has set for reopening the strait. Rather than limiting its demands to lifting the blockade, Tehran has raised the stakes by calling for the withdrawal of US forces and payment of financial compensation, while insisting on exclusive security control over the waterway and threatening to impose sovereign transit fees. Such maximalist escalation does not necessarily indicate an expectation that all these gains can be secured immediately and in a single settlement. Instead, it is intended to engineer a new geopolitical reality that affords Iranian negotiators greater room for trade-offs and forces the US administration onto the defensive.

Between July 26 and 31, 2026, hackers took manual control away from water and wastewater utilities across U.S. states, Minnesota, Michigan, New Jersey, Georgia, and South Dakota among them, with more than 30 community systems hit in Minnesota alone. According to news, cyberattacks on U.S. water systems are suspected to be linked to Iran-backed hackers. Operators in Georgia's Clayton County Water Authority, serving 300,000 people near Atlanta, watched pressure drop and had to issue a boil-water advisory before service was restored within hours. In several cases, the hackers gained remote access to pumps, valves, and water pressure, though the cyberattacks have had no impact on drinking water, which has remained safe.   A hacking front calling itself CyberAv3ngers, an Iranian Revolutionary Guard Corps-linked group sanctioned by the US Treasury Department in February 2024, has since claimed the operation on Telegram, framing it as a warning rather than an attack: "our intention in attacking Minnesota was only to warn" of its abilities and its intention to retaliate against any country that poses a threat to Iran. That framing matters as it leaves us questioning whether an “actual” attack can take place.

Negotiations between Washington and Tehran are entering an increasingly complex strategic juncture, with most of the 60-day timeframe established under the "Islamabad Truce" having elapsed without a decisive agreement. This has been accompanied by renewed hostilities and the Strait of Hormuz once again closing to international shipping.   These developments on the ground coincide with intensive international diplomatic efforts to contain the repercussions of an open military conflict that has clearly weighed on regional and global economic growth.   At the heart of this negotiating landscape is the conspicuous absence of the regional proxy issue from both the draft preliminary agreement and the current talks. Rather than signalling that the issue has been sidelined, this absence raises fundamental questions about the future of the complex network that has for decades formed a central pillar of Iran's deterrence doctrine.   Current political dynamics suggest the proxy issue is no longer a secondary matter that can be deferred or ignored. Instead, it has become a structural fault line that cuts across each side's conception of security and stability, as well as the limits of any viable settlement.   Its exclusion from the initial formulations reflects a clear recognition of how difficult it would be to incorporate the issue without directly confronting red lines at the intersection of Iran's deterrence doctrine, the US vision of regional security, and Israel's efforts to translate military pressure into irreversible negotiating gains.   The dilemma takes on even greater significance in light of recent macroeconomic analyses indicating that the costs of proxy involvement have extended well beyond direct military losses, striking at the heart of the global economy. Proxy-related operations along critical maritime corridors, particularly in the Red Sea, have severely disrupted supply chains and inflicted tens of billions of dollars in losses on international trade through unprecedented surges in shipping and insurance costs. They have also created unconventional threats to the security of digital infrastructure, most notably subsea fibre-optic cable networks.   Security experts emphasise that the structural attrition the Axis of Resistance suffered during the intense confrontations of 2024 and 2025 prompted Tehran's leadership to reassess its tactics and instruments, but not to abandon them.   The crisis stems from a fundamental divergence in the actors' perspectives. Iran regards its network of proxies as a forward line of defence and an integral component of its national security, integrating these groups with its missile and drone capabilities. Washington and Tel Aviv, backed by regional powers, by contrast, view dismantling and disarming these groups as a mandatory precondition for any new regional security architecture.   This reality places the proxy issue at a critical intersection between three complex levels: Iran's pursuit of strategic depth for its defence; US efforts to neutralise sources of asymmetric threat; and regional and international concerns that link market stability and freedom of navigation to ending the activities of these groups around maritime chokepoints and in the Eastern Mediterranean. Any settlement that fails to define the place and functions of these proxies would therefore amount to little more than a fragile truce vulnerable to rapid erosion.   This section examines the divergent perspectives of the key actors on the regional proxy crisis. It assesses how these competing positions may clash or converge behind closed doors at the negotiating table. The paper asks a central question: will these discussions translate into strategic trade-offs that underpin a comprehensive and sustainable settlement, or will divergence between the parties' red lines reduce the anticipated agreement to little more than a temporary tactical freeze before an even more violent round of conflict?   This issue was written on August 2, 2026

Southern Lebanon is undergoing a shift from a traditional peacekeeping framework to a more complex security system, where the Lebanese state, international actors, and new verification mechanisms can share responsibility for achieving and maintaining security. The June 2026 Trilateral Framework Agreement and the August 2026 Rome talks may provide the political start point for this shift, but they don’t determine its outcome. The crucial question is whether the emerging system can establish a sustainable security, or whether the region will remain involved in an externally managed deterrence system.   The United Nations Interim Force in Lebanon (UNIFIL)/UN Security Council Resolution 1701 framework provides the institutional basis for the current transition, but its peacekeeping model was not designed to independently enforce a comprehensive disarmament process or to compel the state to dismantle deeply entrenched non-state actors. Accordingly, its limitations were structural as it couldn’t guarantee exclusive state control over weapons, prevent the rebuilding of non-state actors armed capabilities, or resolve compliance disputes. Consequently, the challenge for the new security architecture is not simply to replace UNIFIL, but to establish mechanisms capable of performing functions that the previous framework could not fully provide.   The signing of the U.S.-supported Trilateral Framework Agreement between Israel and Lebanon on 26 June 2026 appeared, at first sight, to open a path toward a comprehensive peace agreement through ending Israeli military operations in Lebanon and restoring Lebanese sovereignty. However, continued ceasefire violations, the delay in the Israeli withdrawal, and Hezbollah’s refusal to disarm have created obstacles to comprehensive peace in Lebanon. With talks in Rome between Lebanon and the United States in August, expectations have emerged that a genuine negotiation process may begin, potentially helping shape the security order in southern Lebanon.   The question of a new security order is becoming increasingly important in light of recent developments, such as discussions over the establishment of U.S.-backed “pilot zones,” the expansion of the Lebanese Army’s deployment, the future of the UNIFIL, as well as discussion of new international mechanisms to monitor and enforce security arrangements. Accordingly, the future of southern Lebanon should not be viewed as a binary choice between Hezbollah and the Lebanese state. Rather, the indicators point to the emergence of three competing security models that could replace the existing security model. The question becomes whether southern Lebanon is moving toward a state-led security system, an internationally supported security framework, or a retreat from the security developments on the ground, with prolonged managed deterrence continuing to prevail.

Since Egyptian diplomat Boutros Boutros-Ghali left office as UN Secretary-General in 1996, after a US veto blocked his bid for a second term, no Arab has held the organisation's highest office for nearly three decades. This prolonged absence is neither a matter of chance nor, as some suggest, the result of a lack of Arab diplomatic expertise or competence. Rather, it stems from the interplay between the UN's complex selection process and the calculations of global powers, which together create a barrier to the emergence of new Arab candidates for the organisation's leadership.   The roots of this problem lie in the UN's regional group structure and the rules governing geographic rotation. The selection process does not treat Arab states as a single geographic bloc, but divides them between the "African Group" and the "Asia-Pacific Group". This division dilutes Arab voting strength. When it is Africa's or Asia's turn to put forward candidates for the post, Arab contenders must compete with major states that wield considerable political influence and demographic weight within their respective regions, making it difficult to secure the regional backing and consensus required for a successful candidacy.   Alongside this internal division, divisions among the major powers on the Security Council play a decisive role. The Middle East and North Africa is a key arena of great-power competition, subjecting any Arab candidate to intense political scrutiny by the five permanent members. Since securing the post necessarily requires avoiding a veto from any one of them, identifying a candidate acceptable to all the competing powers becomes exceptionally difficult, particularly as each contender is assessed in light of their country's international relationships and global alignments.   This analysis therefore seeks to unravel the reasons behind this prolonged absence. Does the reluctance of Arab capitals to enter the race in recent decades reflect a retreat and an acknowledgement of diplomatic limitations, or does it instead represent a tactical withdrawal and a calculated strategic decision to avoid electoral contests whose rules are structured in ways that effectively exclude candidates from regions at the fault lines of intense geopolitical rivalry?

The global trading system underwent a fundamental transformation in July 2026, as the United States abandoned limited sector-specific protection in favour of a complex, multi-tiered tariff architecture that turned access to its domestic market into an instrument of economic and political pressure. Four major decisions converged within that single month. The first was the outright repeal of the de minimis exemption, which had allowed small consignments valued below eight hundred dollars to enter the country duty-free. The second was the application of the Section 301 forced-labour tariffs across two distinct bands, imposing 10% and 12.5% according to the compliance record of each partner state. The third was the activation of Section 338, a statutory provision that had lain dormant since the 1940s, to levy 50% duties on a range of Canadian goods. The fourth was the approval of a phased escalation reaching 200% on imports of generic pharmaceuticals.   The consequences of this package extended well beyond the raising of customs duties. They amounted to a comprehensive re-engineering of rules of origin and customs compliance requirements, which in turn altered the cost calculus of every manufacturer and supplier across global supply chains. This new reality pushed firms to search for alternative routes designed not merely to reduce transport costs, but to change the identity of the country of origin itself and so escape punitive duties. That search is precisely what turned the Middle East from a transit corridor into an industrial and logistical node positioned to play a pivotal role on the new map of world trade.   This analysis therefore aims to unpack the effects of the July 2026 package across three connected levels: its domestic cost to the American economy in terms of inflation, compliance friction and the feasibility of reshoring; the realignment of trading partners and the trade diversion and origin leakage that follow from it; and finally its direct implications for the economies of the Middle East and North Africa, together with quantitative estimates of price, investment and shipping trends through the end of the decade.