The Gulf Feud and Middle Eastern Economies
The Persian Gulf Feud is presenting major diplomatic challenges for countries around the world. The significance of the matter is sending shockwaves around global politics, with American Diplomats being forced to explain Donald Trump’s twitter comments regarding the issue.
In early June, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut off their diplomatic links with Qatar. The synchronised move was made as a result of Qatar’s supposed supporting of terrorist organisations. Although the disagreements between the countries have been brewing for many years, the climax of this matter represents one of the most serious diplomatic fall-outs in recent history.
The rift has put the US in a difficult situation. Qatar hosts 10,000 America troops at the U.S. Central Command air base. With an aircraft capacity of over 120, it is a vital part of U.S. military operations. Therefore it is in the US’s interests to resolve the issue as quickly as possible. Although Donald Trump’s recent visit to Saudi Arabia has strengthened overall diplomatic relationships in the Middle East, it is hoped that Trump’s twitter comments regarding terrorism in Qatar can be smoothed over. Whitehouse spokesman Sean Spicer insisted that the president’s recent conversation with the Qatari emir had been constructive, and dismissed any concerns about Mr Trump’s intentions.
The economic implications of the Gulf Feud are serious. As neighbouring countries have blocked travel routes in and out of Qatar, trade will inevitably suffer. Although Qatar has an enviable $335bn of assets to help it to avoid economic problems during the feud, its main stock index is already struggling, with trading suspensions being placed on major trading options - including the Qatar Fuel Company. As news of the crisis broke on 5 June, Qatari shares took an 8% nosedive. Although they have since seen a small recovery they are currently trading at a particularly weak rate. The same can be said of Qatar’s currency; on 8 June, the Qatari Riyal hit its weakest point on the foreign exchange market since 1998. This is leading people to take advantage of such weak Middle Eastern currencies by trading forex.
Although there is no indication of a forthcoming solution to the rift, a peaceful solution will have to be made in order to prevent the economic and political situation from escalating. The influence of the US is likely to facilitate talks - but diplomats will be under pressure to do this successfully.
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