Summary

The Middle East is undergoing a historic transformation with unprecedented opportunities to build new relationships, de-escalate tensions, and foster conditions for stronger integration. At the same time, the region remains on edge because of ongoing tensions in Yemen, Syria, Iraq, and other conflict zones, a civil war that broke out recently in Sudan, along with the overarching challenges presented by fraught relations between Iran, Israel, and several Arab Gulf countries — with the longer-term implications of the still-fragile Iranian-Saudi rapprochement yet to be fully assessed.

It is difficult to predict where these countervailing trends will take the broader region and this produces an overall environment of uncertainty that offers a complex mix of opportunities and risks. In a new analytical survey of the region's shifting conflict dynamics, the authors identify two escalation risks and two opportunities to promote de-escalation and foster greater regional integration at the current moment.

Key Findings

A nine-month analytical survey of the Middle East’s shifting conflict dynamics by this study’s authors identified two escalation risks and two opportunities to promote de-escalation and foster greater regional integration at the current moment.

Escalation Risk 1: Iran’s impact on the regional system. The March 2023 Saudi-Iranian deal on normalizing diplomatic ties, which Beijing helped broker, has already produced some signs of a further easing of tensions between Iran and the Gulf. But questions remain regarding the long-term sustainability of this de-escalatory trend, including Tehran’s willingness or ability to stick to whatever specific agreements it had reached with Riyadh. Meanwhile, several factors continue to make Iran and its regional activities the likeliest escalation risk in the broader Middle East in 2023: protests inside of Iran producing greater uncertainty about the regime’s approach; the lack of progress in nuclear talks as well as more aggressive steps toward enriching uranium; Tehran’s continued actions to undermine regional security; and Iran’s overt support for and cooperation with Russia in the context of the war in Ukraine.

Escalation Risk 2: Israel-Palestinian dynamics destabilizing the broader region. The Israeli government’s make-up, structure, ideology, and initial political actions have highlighted numerous potential sources of tensions that have already led to escalation inside of Israel, between Israel and the Palestinians, and in Israel’s relations with the wider region. At the same time, Palestinian politics and political institutions are in a state of paralysis and steady decline. In late 2022 and into early 2023, violent incidents (including terrorist attacks, military actions, and settler violence) were on the rise in the West Bank,1 causing many Israeli and Palestinian casualties, and leading regional countries to call for international intervention.

Opportunity 1: Regional economic integration. Compared to other parts of the world, economic cooperation in the Middle East remains relatively nascent, with some recent diplomatic moves creating the potential for greater and more productive cooperation both within the region and between regional states and external powers like the United States. The prospects for regional economic integration now appear brighter than at any point since the mid-1990s due to a confluence of factors: the advent of new regional and international mechanisms like the Negev Forum,2 the India-Israel-U.S.-United Arab Emirates grouping (I2U2),3 and the Baghdad Summit;4 ongoing U.S. diplomacy to resolve bilateral disputes and facilitate multilateral agreements; and the commitment of a number of regional states — most notably energy-exporting Gulf Arab monarchies like Saudi Arabia but also other countries like Egypt — to long-term national development visions. Developing clean sources of energy and managing the transition away from fossil fuels appear to be particular priorities. External actors such as the U.S. can help play a supporting role in efforts like the Negev Forum working groups aimed at advancing economic cooperation, particularly on clean energy, education, food and water security, health, regional security, and tourism. In addition to these mechanisms, the United States, in conjunction with its allies and partners, should explore the creation of other regional diplomatic groupings that could coordinate efforts to manage, mitigate, and de-escalate conflict and tensions.