The current conflict in the Middle East has reshaped assumptions around regional security, energy resilience and capital flows. On 30 June 2026, S-RM experts Martin Devenish, Board Director and Global Head of Corporate Intelligence, Gala Riani, Head of Strategic Intelligence, Rob Sherwin, Senior Advisor, and Lara Tandy, Head of S-RM’s MENA practice came together to examine the implications for businesses and investors. This article highlights the key insights from that discussion, with the full webinar available to watch on demand or listen here.
A fragile diplomatic pause, not a resolution
In March 2026, S-RM outlined three potential trajectories for the conflict: escalation, a prolonged but regionally contained conflict, or a rapid de-escalation. At the time, we assessed that a protracted conflict was the most likely outcome, and recent developments suggest that assessment remains valid.
The memorandum of understanding signed by the US and Iran in mid-June represents an important, if fragile, attempt to sustain the ceasefire and create a pathway towards a more durable agreement. As Gala Riani noted, the arrangement offers meaningful incentives for Tehran, including access to reconstruction funding, fewer restrictions on oil exports and the longer-term prospect of sanctions relief.
However, the agreement should not be mistaken for a lasting resolution. "There is an enormous trust deficit between Iran and the US," Gala said. "There are almost daily issues, triggers and potential for infractions." While the MoU may reduce the immediate risk of escalation, the underlying drivers of instability remain. For businesses, this points to a risk environment that demands both close monitoring and longer-term contingency planning.
The conflict has also accelerated a broader reassessment of Gulf security arrangements. For decades, the United States has been the cornerstone of regional security, but recent events have prompted fresh questions about the durability of that model. As Gala observed, the conflict is likely to speed up efforts to embed more of the region's security architecture within the region itself, while encouraging Gulf states to diversify their defence and security partnerships beyond Washington.
Iran’s internal pressure points
Despite the conflict, Iran's leadership is likely to portray its survival under intense military pressure as a strategic success. However, that narrative masks a series of deep-rooted domestic challenges.
As Gala noted, significant sections of the population view the regime as part of the problem rather than the solution. Economic hardship, sanctions-related pressures, poor governance, ethnic grievances and demands for greater political freedoms continue to weigh on the country. While the government may project resilience externally, these underlying vulnerabilities are unlikely to disappear.
The regime's response to dissent is also unlikely to change. Repression remains its primary tool for maintaining control, limiting the prospects for meaningful political reform in the near term.
At the same time, Iran is expected to continue pursuing influence beyond its borders. "I don't think that this is the end to Iran's projection of power in the region," Gala said. "If anything, I think they'll lean into that much more." If sanctions relief creates greater financial flexibility, Tehran may seek to reinforce its regional position through a combination of diplomatic, economic and security initiatives.
For businesses, this means that domestic instability and regional ambitions should be viewed as interconnected risks. Internal pressures may shape how the regime behaves externally, while shifts in sanctions, regional relationships and security dynamics will continue to influence the operating environment across the Middle East.
Energy security enters a new Hormuz reality
The conflict has reinforced the strategic importance of the Strait of Hormuz and highlighted the uneven exposure of Gulf economies to disruption in the waterway. The extent of that exposure depends not only on a country's reliance on the Strait, but also on the availability of alternative export routes and infrastructure.
As Rob Sherwin said, some states are better positioned than others to adapt. The UAE benefits from access to ports outside the Strait, while Iraq, Bahrain and Kuwait have potential alternatives, albeit with varying practical and political constraints. Qatar faces a more complex challenge because of its dependence on liquefied natural gas exports. "Qatar is a gas powerhouse and LNG has to be chilled to minus 160 degrees centigrade," Rob explained. "Once it's been chilled in those plants up at Ras Laffan, it cannot be piped to ports outside the Straits or across the peninsula on the Red Sea "
These constraints are likely to influence future investment decisions. In particular, non-Gulf LNG projects may become increasingly attractive relative to further expansion within the Strait of Hormuz. At the same time, the region is likely to accelerate investment in strategic infrastructure, including freight rail, pipelines, ports and port expansions, as Gulf states seek to reduce their dependence on vulnerable maritime routes.
As Rob observed, "The new Hormuz reality is going to take quite some adjustment." For governments and investors alike, the lesson is that access to global energy markets can no longer be assessed solely through traditional supply-and-demand dynamics; resilience and route diversification are becoming equally important considerations.
Old scenarios, new methods
Perhaps more strikingly, the recent disruption has not overturned existing risk scenarios so much as challenged assumptions about how they might unfold. Energy companies and governments have long modelled the possibility of significant disruption to the Strait of Hormuz. What has surprised many observers is the nature of the threat itself.
Historically, contingency planning focused on conventional disruption tactics such as fast attack craft, shore-based missile batteries and floating mines. Recent events have demonstrated the growing significance of seabed mines and longer-range drone capabilities, highlighting how advances in military technology continue to reshape the risk landscape.
The conflict has also challenged assumptions about how quickly freedom of navigation could be restored after a major disruption. As Rob noted, previous planning often assumed that a coordinated international response would rapidly reopen the waterway. That assumption now appears less certain. "Maybe there has been some failure of imagination in the past," he said, adding that advances in military technology have "absolutely changed the equation."
For businesses, the implication is clear: scenario planning remains essential, but organisations must continually revisit the assumptions that underpin those scenarios. While the risks may be familiar, the ways in which they materialise may not be.
How has the conflict affected investor appetite?
The conflict has prompted many investors and corporates to reassess capital allocation decisions. Heightened uncertainty has contributed to slower decision-making, portfolio reviews and adjustments to deployment strategies, with some transactions delayed into later quarters or financial years.
These developments come against an already subdued global economic backdrop. In its April 2026 World Economic Outlook, the IMF projected global growth of 3.1% in 2026 and 3.2% in 2027, assuming the conflict remains limited in both duration and scope.
However, recent market behaviour suggests that investors continue to distinguish between short-term disruption and longer-term opportunities. Despite the conflict, a number of prominent asset managers and investors have opened or committed to opening in the Gulf, reflecting their dedication to the region in the years ahead.
What has changed is the way investors assess risk. As Lara Tandy noted, geopolitical considerations are becoming more deeply embedded in investment decision-making, with greater emphasis on scenario planning, horizon scanning and geopolitical analysis when evaluating opportunities, pricing risk and insurance.
The impact is also varying significantly by sector. Demand remains strong in areas viewed as strategically important, including healthcare, defence, national security and critical infrastructure. By contrast, sectors more immediately exposed to shifts in sentiment such as tourism, passenger aviation and real estate – have experienced slower transaction activity and greater pricing uncertainty.
For businesses and investors, the key takeaway is that geopolitical risk is increasingly shaping investment decisions rather than preventing them altogether. Against this backdrop, the question of how organisations adapt their due diligence, risk assessment and investment strategies to a more uncertain operating environment is critical.
A shift in Gulf governments’ investment priorities
The conflict appears to be accelerating trends that were already taking shape across the Gulf: a stronger focus on national resilience, economic security and strategic self-sufficiency.
One likely consequence is a greater emphasis on domestic investment and regional economic development. As Lara noted, governments may increasingly prioritise capital deployment within their own markets rather than supporting overseas investment activity, which could reinforce a "Gulf capital for the Gulf" approach.
Sovereign wealth funds may also play a more prominent stabilisation role. Having accumulated substantial reserves over recent years, some funds could be mobilised to support domestic resilience, strategic industries and economic continuity during periods of uncertainty. At the same time, governments are likely to adopt policies designed to bolster business confidence, such as subsidies and support measures.
For businesses and investors, the implication is that market access may become more closely linked to local alignment. Organisations that demonstrate a long-term commitment to the region, invest locally and contribute to national development priorities are likely to be better positioned than those pursuing a purely transactional approach.
Adapting to a more volatile risk environment
For businesses operating in the Middle East, the challenge is not simply monitoring geopolitical developments, but understanding which developments matter most to their organisation and how they could affect operations, customers, supply chains and investment decisions.
As Gala noted, organisations need structures that help them distinguish meaningful developments from background noise. Effective geopolitical risk management starts with identifying where risks are concentrated – across suppliers, customers, critical dependencies and geographic footprints – and then assessing how different scenarios could affect business performance.
This requires more than monitoring headlines. Scenario planning, horizon scanning and ongoing intelligence analysis can help organisations identify emerging risks, test assumptions and prepare for multiple outcomes before they materialise.
Businesses should also ensure they are planning for low-probability, high-impact events. As Gala observed, many of the most disruptive geopolitical developments of the past decade were once regarded as unlikely. Organisations that focus only on the most probable scenarios risk being exposed when unexpected events occur.
Ultimately, resilience depends on preparedness rather than prediction. The goal is not to forecast every geopolitical development, but to build the capabilities needed to respond quickly and effectively when conditions change.
Conclusion: resilience, but a changing risk landscape
The Middle East remains a region of significant opportunity, but the risk landscape is changing. While businesses and investors can continue to operate and invest successfully, doing so will require a more disciplined approach to geopolitical risk, stronger resilience planning and a clearer understanding of how regional developments could affect their specific exposure.
Geopolitical uncertainty is becoming a more permanent feature of the operating environment. A common theme is emerging across energy markets, investment decisions and government policy: organisations can no longer assume that periods of stability will return risk management to the background.
