A New Middle East Is Emerging From the Iran War

Summary

Podcast Summary: The New Middle East Emerging From the War in Iran

Podcast: The Big Take from Bloomberg and iHeartPodcasts
Host: David Gura
Episode Date: July 13, 2026

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Episode Overview

This episode of The Big Take explores the dramatic changes in the Middle East since the escalation of conflict involving Israel and Iran, contextualized by the October 7, 2023, Hamas attack on Israel and subsequent regional warfare. David Gura speaks with Bloomberg’s Middle East correspondent Peter Martin to dissect shifting alliances, economic repercussions, and the lasting geopolitical impact across the region and beyond.

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Key Discussion Points & Insights

1. A Defining Day: March 31, 2026

• Symbolic Events:

  • Iranian strike leaves Kuwaiti tank blazing in the Strait of Hormuz.
  • Former US President Trump criticizes European allies over the crisis.
  • Israel deepens involvement in battlefields across Lebanon and beyond.
  • Dubai is targeted by an unprecedented Iranian missile and drone attack.

• Diplomatic Shifts:

  • UK Prime Minister Keir Starmer meets new Syrian President Ahmed El Shara (a former Al Qaeda commander)—highlighting diplomatic realignments.

• Global Consequences:

  • Disruptions to global shipping, rising energy prices, shifting alliances, Israel’s territorial ambitions, and deepening diplomatic isolation.

  “It felt like that day kind of encapsulated the global consequences of the war.”
  — Peter Martin [02:36]

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2. The Middle East’s New Geopolitical Landscape

• Expanded Conflict:

  • The fighting has spread from Gaza to Lebanon, Syria, Yemen, Iran, and, more recently, the Gulf states.
  • Israel is militarily stronger but faces critical diplomatic isolation.
  • Iran’s proxy network is battered yet maintains economic leverage via the Strait of Hormuz.
  • Gulf states, previously insulated from conflict, now feel acutely vulnerable.

  “The Gulf, which for so long seemed insulated from turbulence... has really lost a lot of that sense of insulation and feels much more at risk than ever before.”
  — Peter Martin [03:36]

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3. Breakdown of Gulf Unity & Realignment

• Pre-War Normalization Moves Stalled:

  • Saudi–Israel normalization is derailed due to public and elite anger over Israel’s assault on Gaza (over 70,000 Palestinian deaths, controversial strikes).
  • The UAE diverges, aligning closely with the US and Israel.

• Emerging Camps:

  • Saudi Arabia strengthens ties with Egypt, Turkey, Pakistan, and some Gulf neighbors.
  • UAE doubles down on intelligence and military cooperation with Israel.

  “We’ve really seen the region kind of fold into two different opposing camps. That’s a profound and... probably lasting shift.”
  — Peter Martin [04:22]

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4. Israel: Militarily Strong, Diplomatically Isolated

• Tactical Gains, Strategic Costs:

  • Israel severely weakens Iran’s proxies and directly targets Iran with US backing.
  • Heightened isolation due to conduct in Gaza—strained US relations, loss of European and Global South support.
  • US public opinion shifts notably, including within the traditional Republican base.

  “It’s difficult to believe that that doesn’t represent quite a profound weakening of Israel’s position and its relationship with the US long term.”
  — Peter Martin [06:35]

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5. Diverging Gulf Responses to War

• Saudi Arabia: Moves away from Israel, aligning with Turkey, Egypt, and others. Driven by public outrage over the humanitarian crisis in Gaza.

• UAE: Moves closer to Israel and the US, deepening intelligence and military ties.

  “We really saw the region realign... Saudi Arabia deepening its ties... and the UAE really doubling down on its relationship with Israel.”
  — Peter Martin [07:25]

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6. The War’s Fallout for Gulf Nations

• Direct Involvement:

  • UAE suffers massive drone/missile attacks (3,000+ strikes), casualties, and infrastructure damage.
  • Qatar loses 17% of LNG output; Saudi and others face turmoil.
  • The image of Gulf states as stable investment havens is severely damaged.

  “It’s really been very widespread and very difficult for Gulf states, which have long relied on this perception that they were... an exception in the region...”
  — Peter Martin [08:39]

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7. Economic Repercussions and Adaptations

• Energy Shockwaves:

  • Oil surges 60% to $118/barrel, gas prices spike, shipping and insurance costs soar globally.
  • Economic pain is felt in Africa, Europe, and the US; potential political fallout in the US midterms.

• New Infrastructure Strategies:

  • Saudi Arabia expands Red Sea pipelines to bypass the Strait of Hormuz.
  • UAE seeks full independence from the Strait, while Oman considers toll fees for transit—signaling the end of status quo free movement.

  “Long term, they’re looking to ensure they can build up that insulation... The status quo was free and open commerce through the Strait. That looks like it’s now gone forever...”
  — Peter Martin [13:33]

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8. Israel’s Future on the World Stage

• Mounting Isolation:

  • Persisting with strikes against Iran, Israel doubles down on security over diplomacy.
  • Difficulty recalibrating relationships without shifting foreign policy priorities.

  “As long as that is the direction... it’s super hard to see how it’s going to recalibrate relationships...”
  — Peter Martin [15:03]

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9. Iran’s Leverage and Resilience

• Pain Threshold Paradigm:

  • Iran’s control of the Strait gives it sustained leverage.
  • Historical parallel: US underestimated Vietnam; here, Iran’s systemic resilience against sanctions and strikes poses a persistent challenge for the US.

  “In the case of Iran... it’s the dependence of the global economy on energy and the leverage that Iran has over the Strait of Hormuz. And Iran famously has a very high pain threshold."
  — Peter Martin [16:02]

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10. Permanence of the New Middle East?

• Key Long-Term Changes:

  • Iran’s proxy networks are weakened (possibly temporarily).
  • Israel’s isolation is likely enduring absent policy changes.
  • Saudi–Israel normalization, and the Gulf rift, may not be permanent but are deeply set for now.

  “There are some sort of themes... likely to emerge as at least somewhat semi-permanent."
  — Peter Martin [17:04]

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Notable Quotes & Memorable Moments

• On the long-term Gulf perception:
  “The Gulf, which for so long seemed insulated from turbulence in the Middle East, has really lost a lot of that sense of insulation and feels much more at risk than ever before.”
  — Peter Martin [03:36]

• On proxy networks:
  “Iran’s proxy network has been battered and weakened, but it has retained significant leverage over the global economy.”
  — Peter Martin [03:36]

• On Israel’s isolation:
  “It’s arguably more isolated than it’s ever been... Its conduct in its war in Gaza has damaged its relationship with Europe, countries across the global south, and much of the Arab world.”
  — Peter Martin [05:37]

• On changing trade routes:
  “Saudi Arabia is talking about expanding its east–west pipeline to the Red Sea to try and sidestep its dependence on the Strait of Hormuz. The UAE has said that it wants to completely eliminate its dependence on the Strait.”
  — Peter Martin [13:33]

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Timestamps for Significant Segments

• [01:38] Introduction: Timeline of escalation and regional transformation
• [02:01] Key events of March 31, 2026
• [03:36] Broader shifts in the Middle East’s internal geography and alliances
• [04:22] Breakdown of Gulf unity and the rise of opposing camps
• [05:37] Israel’s current strategic and diplomatic position
• [07:25] Contrasting approaches of Saudi Arabia and UAE
• [08:39] Direct consequences for Gulf nations
• [12:08] Economic fallout from ongoing conflicts
• [13:33] Gulf nations’ adaptation and strategic recalibration
• [15:03] Israel’s growing global isolation and diplomacy outlook
• [16:02] Iran’s leverage and the pain tolerance paradigm
• [17:04] Assessment of how permanent these changes might be

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Conclusion

This episode highlights the enduring, multifaceted impact of the most recent Middle East conflicts: entrenched divisions in the Gulf, Israel’s military gains offset by sweeping diplomatic losses, Iran’s tenacity and economic leverage, and a sea change in regional and global economic flows. While some of these transformations may still shift, the “old” Middle East is gone, and the path forward remains fraught with unresolved tensions and new alignments.

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Transcript

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Bloomberg Audio Studios Podcasts Radio News

[David Gura]

the Middle east has changed dramatically since Hamas attacked Israel on October 7, 2023. And the war with Iran has brought about even more dramatic shifts across the region.

[Peter Martin]

There was so much at play.

[David Gura]

Bloomberg's Peter Martin, one of our Middle east correspondents, were looked at how one day highlights those changes. March 31, 2026 there was a Kuwaiti

[Peter Martin]

tank that had been hit by an Iranian strike that was sort of blazing in the Strait of Hormuz. Trump on that same day was berating European allies for refusing to help open the Strait of Hormuz. Israel was expanding its presence on the battlefield in Lebanon and beyond. Dubai was under direct attack from Iranian missiles and drones.

[David Gura]

And on that day, thousands of miles away from the United Arab EMIRATES in the UK then Prime Minister Keir Starmer welcomed Syria's new President Ahmed El Shara to 10 Downing Street. He's a former Al Qaeda commander, and

[Peter Martin]

together it felt like that day kind of encapsulated the global consequences of the war. You know, an impact on global shipping, higher energy prices, strained alliances, Israel's territorial expansion and subsequent diplomatic isolation.

[David Gura]

Peter says that single day represents how much the Middle east has been transformed. Alliances have shifted, battlefields have expanded, and countries have had to redraw trade routes. And that has left the public divided. I'm David Gura and this is the big take from Bloomberg News today on the show. As a fragile ceasefire between the US And Iran falls apart, and as technical talks are enveloped in uncertainty, a look at what war has meant for the wider region and the world. How much has the Middle east changed since Hamas attacked Israel on October 7, 2023?

[Peter Martin]

I mean, the region has been through a pretty profound transformation. Conflict has spread from Israel into Gaza and then all across the region. Lebanon, Syria, Yemen, Iran, and now in this most recent round of fighting, all across the Gulf states as well. During that period, Israel has emerged stronger militarily, but perhaps more isolated than ever politically. Iran's proxy network has been battered and weakened, but it has retained significant leverage over the global economy. And the Gulf, which for so long seemed insulated from turbulence in the Middle east, has really lost a lot of that sense of insulation and feels much more at risk than ever before.

[David Gura]

When we talk about a place changing, what's changed exactly?

[Peter Martin]

One of the things that we've seen break down is any sense of Gulf unity. Saudi Arabia before October 7th was moving toward normalization with Israel, perhaps some kind of Abraham Accord style agreement that really is, for the moment, off the table, given public perceptions in Saudi Arabia, elite perceptions of what Israel has done in Gaza with more than 70,000 Palestinians killed, and strikes across the region, including an Israeli strike in Qatar, which was extremely controversial. And the UAE has taken a completely different path. It's aligned itself much more closely with the United States and with Israel. And we've really seen the region kind of fold into two different opposing camps. That's a profound and I think probably lasting shift.

[David Gura]

So our colleagues at Bloomberg Economics have kind of analyzed how attitudes and alliances have shifted over 10 countries in the Middle East. From that analysis, two countries emerged with the most strained ties. And I don't think that's going to surprise anybody. We're talking about Iran and Israel. So let's start with Israel. And I wonder, Peter, how you would characterize Israel's position in the Middle east today?

[Peter Martin]

Yeah, you know, I think that Israel has emerged as militarily stronger. It has dealt severe blows to Iran's proxy network across the region. And in the 12 day war and the most recent war with Iran, has even been able to strike at Iran's own military capabilities on its home soil and to do that in lockstep with the United States, which in many ways is the high point of Netanyahu's career, something he's been building toward for 30 years. But at the same time, that's come at a huge diplomatic it cost for Israel. The country is arguably more isolated than it's ever been. Its conduct in its war in Gaza has damaged its relationship with Europe, countries across the global south, and much of the Arab world. Regional partners also see Israel differently. So while the United Arab Emirates has kind of doubled down on its close relationship with Israel, Saudi Arabia, the largest player in the region, has really taken pause and found it much more difficult to get closer to the country. And perhaps most important of all, Israel's longstanding special relationship with Washington has come under strain. Public opinion in the US has shifted quite considerably, especially on the Democratic side, but even inside Trump's base. And it's difficult to believe that that doesn't represent quite a profound weakening of Israel's position and its relationship with the US Long term.

[David Gura]

I want to get more into that contrast that you're laying out between the UAE's approach and Saudi Arabia's approach. So you've talked about sort of the approach that the UAE has taken. What has Saudi Arabia done in kind? How does its approach to Israel in the Middle east more broadly differ from what the UAE's has been?

[Peter Martin]

Yeah, you know, before, before October 7th, it looked like there was something of a unified approach to what Israel developing among the Gulf states. But October 7th really changed everything for the Saudi public and for Saudi politicians. That approach became untenable as images of malnourished children, of strikes across Gaza, disruption and rubble across the enclave built up. And the kingdom has moved away from that. At the same time, the UAE has kind of made the opposite choice. It's deepened intelligence and military cooperation with Israel. And we've really seen the region realign, with Saudi Arabia deepening its ties with Egypt, Turkey, Pakistan, and some of its other Gulf neighbors, and the UAE really doubling down on its relationship with Israel.

[David Gura]

I'm reluctant, of course, to talk about Gulf nations as a monolith here, but my sense is there was widespread opposition to the most recent war that we've seen started, that being the US And Israel's attack on Iran. Could you talk a bit about what the direct consequences have been for those nations as a result of that war starting and continuing?

[Peter Martin]

Yeah, I mean, for Gulf nations, it's really taken them to the front and center of Middle Eastern conflict for so long it looked like they were insulated from the kind of instability that we've seen in the Middle east long term. The UAE has been hit by around 3,000 drones and ballistic missiles from Iran. It's seen at least 13 people killed, infrastructure badly damaged, damaged. Qatar has had, I think something like 17% of its LNG capacity taken offline. Saudi Arabia, as a bigger economy, has been a little bit more insulated, but has also been roiled by the conflict as Bahrain, Kuwait, Oman. So it's really been very widespread and very difficult for Gulf states, which have long relied on this perception that they were something of an exception in the region as a way to attract investment expat populations and all that kind of stuff.

[David Gura]

Coming up, assessing the economic changes and challenges in the Middle East.

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[David Gura]

Peter, you've charted the geopolitical fallout from these wars. What about the economic fallout? What have these wars meant to what was or has been a real bright spot in the global economy?

[Peter Martin]

Yeah, I guess the most immediate impact was on energy inflation. Brent crude rose, I think 60 plus percent in March to about $118 a barrel. U.S. gasoline prices surged above $4 a gallon. Costs for shipping increased, costs for insurance of shipping increased significantly. And of course, all of these disruptions have had a global impact. They've hit prices for fuel in Africa, where we've seen protests. They've hit prices for consumers in Europe and the United States. And of course, they threaten to have an impact on the midterms in the US as well, with the potential that this conflict will come back to bite Donald Trump.

[David Gura]

You've taken me where I want to go next and that is how this is playing out, not just in the Middle east, but around the world. It's had dramatic effects on the relationships between Middle Eastern nations and many other countries. It strikes me in light of what you've just laid out there, there has to be a great deal of introspection in Gulf capitals about the relationships they have with other countries around the world, how they get energy out to other parts of the world. How are they thinking about the future when it comes to their relationship with the wider world.

[Peter Martin]

Gulf countries are thinking about how they ensure that this never happens to them again. Saudi Arabia is talking about expanding its east west pipeline to the Red Sea to try and sidestep its dependence on the Strait of Hormuz. The UAE has said that it wants to completely eliminate its dependence on the Strait. So, you know, long term, they're looking to ensure that they can build up that insulation that they want to have. That's not possible for everyone. You know, Qatar is still going to remain dependent on shipping to remove natural gas from the country. But as far as they can, they're trying to build up resilience. Exactly. What the settlement around the Strait of Hormuz looks like at the end of this is still very much an open question. The Omanis have been talking to the Iranians directly about some kind of charge or toll on the strait, which is extraordinary when you think back to before this most recent Iran conflict began, where the status quo was free and open commerce through the Strait that looks like it's now gone forever and something else will emerge in its place. Just underlining really how profound some of these shifts have been since October 7th.

[David Gura]

I want to ask you too, just about Israel's isolation. We have data about global attitudes towards Israel, how people are feeling about the Israeli government at this moment in time. We've seen more governments criticize the Israeli government. What does its path forward look like vis a vis the kind of broader global community?

[Peter Martin]

It's really hard to say. Like, look, Netanyahu wants to continue strikes against Iran. He's doubled down on the kind of foreign policy approach that has heightened Israel's global sense of isolation, including inside the US and as long as that is the trajectory of Israeli foreign policy, which emphasizes absolute security, the necessity of reaching far beyond Israel's borders to uphold its sense of security at home. As long as that is the direction that Israeli politicians, Israeli strategists, want to take, I think it's super hard to see how it's going to recalibrate relationships with Europe, countries across the global south and much of the Arab world.

[David Gura]

So, Peter, this conflict continues. A ceasefire really hasn't held. And because Iran controls the Strait of Hormuz, as you write, it does seem to have the upper hand here over the US when it comes to these negotiations so much as they are continuing.

[Peter Martin]

It's fascinating because it's something that we've seen in protracted conflicts with the US Again and again. You think back to Vietnam, a much, much weaker adversary, managing to gain leverage by understanding what US Pain points are. In the case of Vietnam, it was the death of US Troops, which turned out to be the Achilles heel of the United States. And in the case of Iran, in this most recent conflict, it's the dependence of the global economy on energy and the leverage that Iran has over the Strait of Hormuz. And Iran famously has a very high pain threshold. It's dealt with sanctions and its political system, even in this most recent conflict, with massive American and Israeli strikes on the country, has proved capable of maintaining its, its position in charge and pushing forward. And it's difficult to see the US matching that.

[David Gura]

Peter, let me ask you lastly, how permanently transformative have these last few years been?

[Peter Martin]

There's nothing more dangerous to ask someone to do than make long term predictions about the Middle East. But you ask, so I will try. You know, I do think that there are some sort of themes that are likely to emerge as at least somewhat semi permanent. So Iran's proxy network is much weaker in the short term, and I think it will be difficult for Iran to rebuild that network in the short term, even as it maintains leverage over the Strait of Hormuz. Israel's isolation, as we discussed, is going to take a long time to reverse and would require changes in Israeli foreign policy, I think that don't look like they are on the horizon for now. Saudi Israeli normalization has suffered a huge setback in large part because of public opinion in the Kingdom. That one I think could change, I think in the short term, and probably the same with the rift in the Gulf that's emerged between Saudi Arabia and the uae.

[David Gura]

Peter, thank you very much.

[Peter Martin]

Thank you.

[David Gura]

This is the Big Take from Bloomberg News. I'm David Gura. To get more from the Big Take and unlimited access to all of bloomberg.com, subscribe [e-mail] podcast offer. If you like this episode, make sure to follow and review the Big Take. Wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow.

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