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The Middle East War has dominated headlines over the past six months, and rightly so. A good portion of the world’s hydrocarbons emanates from the region and hostilities seem to be never-ending. However, we might be on the verge of a major change in the political landscape in the Middle East with profound implications.
The mythical figure Sisyphus was condemned by Zeus to perpetually push a boulder up a steep hill.1 For the past several months, Iran, Israel, the United States, and to a lesser extent, other Gulf countries have been on a never-ending tit-for-tat destruction path which makes for terrific videos but is an absolute horror on the ground. Slowly, it appears that all sides are realizing that no side can be an ultimate victor and the endless cycle is extremely expensive and counterproductive.
Saudi Arabia has the largest proven crude oil reserves in the Middle East.2 Unfortunately, Saudi Arabia and Iran have been at each other’s throats for years. The potential shift has come in the form of a signed US civil nuclear cooperation agreement, which Washington has made conditional on Saudi Arabia joining the Abraham Accords. (Joining the Abraham Accords essentially means establishing formal diplomatic relations with Israel.3) Riyadh has not agreed to join, and continues to tie normalization to progress on Palestinian statehood. Connected to any such recognition would be an opening of the Strait of Hormuz and a tempering of the hostilities. Possibly, Iran will receive compensation for passage through the Strait.
Supposedly, the leverage Saudi Arabia is using with Iran is that the Strait of Hormuz could be circumvented by enhancing the East-West Pipelines (see below). If Saudi Arabia expands such pipelines, it could avoid shipping through the Strait. Another item is that while Iran probably has the easiest route for blocking the Strait of Hormuz, other bordering countries such as the UAE and Qatar could respond in a similar manner. Note that pipelines and supporting infrastructure are likely to remain vulnerable to Iranian strikes though the alternative route might deprive Iran of Hormuz toll revenue in the long run.
While all this sounds terrific, the Middle East appears to always be at war, and it takes little for fragile egos to turn to arms, particularly when it has been demonstrated that it takes little to close the Strait.
Despite some deep-seated prejudices, everyone has to be concerned about feeding their families and there is little doubt that the war has made that task increasingly difficult. It is likely that peace serves a greater need than war and hopefully, a peaceful path can be found.
For the current administration in Washington, there is little doubt that Midterm Elections are on the minds of many and this war has not been popular. Now comes the hard part of explaining the value of the war. That explanation will be a lot easier with a material decline in energy prices.
The Middle East War has had a major impact on the global economy over the past few quarters and might be on the verge of a resolution. If this happens, it should be relevant to most sophisticated institutional investors and risk managers.
1. The myth of Sisyphus and his punishment by Zeus: World History Encyclopedia.
2. Saudi Arabia holding the largest proven crude oil reserves in the Middle East: OPEC Annual Statistical Bulletin 2025, Table 3.1.
3. The US-Saudi civil nuclear cooperation agreement and Washington making it conditional on Saudi Arabia joining the Abraham Accords: Channel NewsAsia.
• Hero image: Sisyphus, Antonio Zanchi, c. 1660-1665, oil on canvas, 110.4 x 119.8 cm, Mauritshuis, The Hague; public domain. mauritshuis.nl
• Exhibit 1, Saudi Arabia’s Hormuz-Bypass Pipeline System: Egan-Jones. East-West Pipeline (Petroline) throughput of approximately 7 million barrels a day: Saudi Ministry of Energy, reported by Al Jazeera (April 12, 2026).
• Exhibit 1, proposed expansion: preliminary discussions on expanding East-West Pipeline capacity by 1 to 2 million barrels a day, and UAE bypass expansion to Fujairah: Reuters, reported by Pipeline & Gas Journal (July 2026).
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