Opinion | Why 2 Gulf States Want Iran War To Continue - Even As They're Battered By It

4,391 Iranian drone and missile attacks (about 83% of total) have struck GCC states, with the UAE hit ~2,156 times and Saudi Arabia ~723 times (two fatalities), severely disrupting Gulf energy and port infrastructure. Attacks and threats to the Strait of Hormuz and Bab-el-Mandeb are curtailing oil, gas and petrochemical exports, causing multi‑million dollar losses and reputational damage to Gulf financial hubs. The piece warns that waning U.S. commitment and a protracted conflict could force Gulf states to face an angrier Iran alone, heightening systemic risk to global energy markets and shipping routes.

Analysis

Gulf instability amplifies frictional costs across global trade infrastructure in ways markets underprice: shipping reroutes, longer voyage times and emergent war-risk premiums are a multi-month tax on container and tanker throughput that compresses netbacks for end-users while fattening intermediaries (brokers, insurers, re-shippers). Expect charter rates and war-risk surcharges to remain elevated until either a durable diplomatic architecture is visible or market participants build redundant capacity; both outcomes take quarters, not days, to materialize.

Defense and security-capex demand is a structural second-order winner — not just immediate weapons sales but a multi-year expansion in coastal and critical-infrastructure hardening, private security, and cyber/ISR procurement that benefits large primes and specialist integrators with export capacity. Conversely, GCC financial services, tourism-facing assets, and locally concentrated sovereign-credit risk are the underappreciated losers: fiscal buffers will be eroded by higher security outlays and disrupted trade flows, pressuring issuance spreads and bank NPL sensitivity over 12–24 months.

Catalysts to watch that would re-rate positions quickly: a China- or Pakistan-led backchannel that credibly guarantees Red Sea transit, coordinated SPR releases by consuming nations, or a tranche of GCC bilateral defense pacts that shifts risk away from Western suppliers. The primary tail risk is regional escalation into wider maritime blockades or retaliatory strikes on major export infrastructure — a scenario that would spike insurance costs, BDI/TC indices, and oil volatility within days and sustain them for months.

Key Decisions for Investors

• Long RTX (Raytheon Technologies) — 6–12 month horizon. Rationale: direct revenue upside from accelerated Gulf/EM defense procurement and sustainment; target +25% if new export contracts announced, stop -12% on rapid de‑escalation. Position sizing: 2–4% of equity risk budget or buy 9–12 month calls to lever upside and cap downside.
• Long PXD (Pioneer Natural Resources) or XLE — 3–6 month horizon. Rationale: oil price shock insurance given continued chokepoint risk; target +20% on Brent +$8–12, downside -15% if markets price in rapid transit normalization. Use a collar or buy-call spread to limit premium burn.
• Buy MMC (Marsh & McLennan) or AON — 6–9 month horizon. Rationale: brokers capture outsized revenue from rising war-risk and marine insurance premiums with limited loss exposure; target +15–20% as renewal cycles repriced, stop -10% if premiums quickly normalized. Prefer equity over paper reinsurance which has higher loss tail.
• Tactical hedge: buy short-dated VIX calls or allocate 1–2% to UVXY calls for 30–90 days. Rationale: protects portfolio from rapid spike in risk premia from escalation or surprise strikes; expect sharp payoffs on 1–3 day volatility events that accompany kinetic escalation.