Israel-Iran conflict hangs over Washington energy conference

Middle East experts assess seismic regional shifts at Petro Diplomacy Conference

The aftermath of an Iranian missile strike on June 24 in Beersheba, Israel. Discussions at Tuesday's Petro Diplomacy Conference were taken into new territory by the conflict. Getty Images

Unanswered questions and an uncertain outlook following the Israel-Iran conflict dominated an annual gathering in Washington to discuss emerging trends in the Gulf's energy plans.

While Tuesday's 11th annual Petro Diplomacy Conference hosted by the Arab Gulf States Institute was billed to discuss the Gulf Co-operation Council's diversification efforts, analysts were instead left to address with the wider developments in region.

That morning, President Donald Trump scolded Israel and Iran for breaking a ceasefire agreement he had announced the night before. That came after a series of events shaking the region, punctuated by the US joining the conflict over the weekend.

PodcastGulf economies and the Iran-Israel conflict: What's next?

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Traders love volatility. That's how you make money. Producers don't

Raad Alkadiriz,
senior associate at CSIS.

That left leading thinkers playing catch-up at the think tank's downtown Washington conference to developments that seemed to change by the hour.

“I don't think anyone really knows where we are,” said Mona Yacoubian, director of the Middle East Programme at the Centre for Strategic and International Studies.

There are different paths that could unfold. The crisis could escalate further, or Iran's restrained retaliation against a US airbase in Qatar on Monday could open the door for diplomacy.

“The Iranians are in such a weakened position that they were really not interested in undertaking a response that would have goaded the US or compelled the US to respond again even more strongly,” Ms Yacoubian said.

Iran's response and Mr Trump's ceasefire announcement sent oil prices tumbling. Brent, the global benchmark for crude, closed 6 per cent lower on Tuesday.

“Traders love volatility. That's how you make money. Producers don't,” said Raad Alkadiriz, a senior associate at CSIS.

Donald Trump expresses frustration with Israel as ceasefire with Iran hangs in the balance

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So far, traders appear less spooked than they were in 2019, when Iran attacked oil processing facilities in Saudi Arabia.

“At this point the market is very much thinking:n 'Look, we're going to bet on real disruption when we see it, and not on some kind of fear of that disruption,'” said Phillip Cornell, non-resident senior fellow at the Atlantic Council and former adviser to Saudi Aramco.

Still, questions over the effectiveness of America's strikes on Iran's three nuclear plants remain unanswered. US media reported that Washington's strikes had only set back Iran's nuclear programmes by a few months, which the White House has denied.

"The market is very much thinking: Look, we're going to bet on real disruption when we see it, and not on some kind of fear of that disruption

Phillip Cornell,
non-resident senior fellow at the Atlantic Council

And even as Mr Trump said now is the time for peace, a more sour outlook hung over the conference at the Army Navy Club in downtown Washington.

“Iran is not going to come to come to the table and say: Please don't do it again,” said Alan Eyre, diplomatic fellow at the Middle East Institute and former member of the US Foreign Service.

“This has replaced, I think, for many Iranians, the [1984] Iran-Iraq war as the motivating trauma that's going to guide them going forward.”

Rescue and recovery crews at work at a residential site in Be'er Sheva following a missile attack from Iran on June 24. Reuters

Contrails from Israeli air defence system are visible as interceptor rockets are launched towards Iranian missiles during an Iranian attack on June 24. AP

Residents spend the night in an underground garage as a precaution against Iranian missile attacks in Tel Aviv on June 23. AP

Supporters of regime change in Iran rally outside the Wilshire Federal Building in Los Angeles, California. The Los Angeles area holds the largest Iranian community in the world outside of Iran. AFP

A US Air Force B-2 Spirit bomber takes off from Whiteman Air Force Base in Missouri to support Operation Midnight Hammer against Iran. AFP

Projectiles in the sky over Doha, Qatar, on June 23 as the US military base at Al Udeid is attacked by Iran. AFP

The remnants of an Iranian missile intercepted over Qatar. AFP

The conflict adds another shade of uncertainty to the region's economic prospects. Analysts say that the Gulf, while largely insulated from the direct effects of Mr Trump's tariffs, are likely to be affected significantly through the higher cost of production in the US.

And even less is known about the economic impact of the Israel-Iran conflict.

Speaking to the House Financial Services Committee in Congress, Fed Chairman Jerome Powell said he would not want to speculate on how it would impact the economy.

Meanwhile, Wells Fargo economists maintained their projection the global economy would grow by 2.7 per cent this year despite recent tensions.

“While new confrontation marked a major geopolitical flashpoint in the Middle East and globally, we do not expect any economic disruptions from the conflict and maintain our view that growth prospects are improving,” economists Brendan McKenna and Azhin Abdulkarim wrote in a note to clients.