Gulf-co-operation counsel: what next for the region

Summary

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Economist Podcasts — "Gulf-co-operation counsel: what next for the region"

Date: June 30, 2026
Hosts: Jason Palmer and Rosie Blore
Guest: Greg Karlstrom, Middle East correspondent

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Overview:

This episode examines the enduring impacts of the war between Iran and the United States on the Arabian Gulf states, evaluating the region's stability, economic fortunes, and the future of regional cooperation. Through a conversation with Economist Middle East correspondent Greg Karlstrom, the episode explores how Gulf nations are recalibrating for a more unpredictable security environment and what this means for their economies, geopolitics, and internal unity.

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Key Discussion Points and Insights

1. The Ceasefire Between Iran and the US: An Unsteady Truce

Timestamps: 01:13—02:10

• Despite a declared ceasefire, conflict between Iran and the US (and its Gulf allies) continues with regular attacks.
• The state of diplomatic negotiations remains unclear, with contradictory signals regarding further US-Iran talks.
  • Jason Palmer: “It’s also hard to figure out the state of negotiations between America and Iran… In short, it’s all still uncertain.”

Memorable Quote:

"That uncertainty, for Iran and for all its regional neighbors, may be the most potent and lasting harm of this war."
— Jason Palmer (01:47)

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2. Comparing the Current Crisis to Past Gulf Conflicts

Timestamps: 02:10—04:18

• Greg Karlstrom contextualizes the current instability, comparing it to historic shocks such as the tanker wars of the 1980s and Saddam Hussein’s invasion of Kuwait in 1990.
• Though the direct human cost has been lower—few fatalities from missile/drone strikes—the economic impact is enormous, with tens of billions of dollars in damage.
• Gulf states have managed short-term stability (e.g., keeping shelves stocked despite the closure of the Strait of Hormuz) at significant cost.
• The modern Gulf is “a huge player in everything from finance to logistics,” and its growth is grounded in an assumption of regional stability now threatened by Iran’s actions.

Memorable Quote:

“All of that growth, all of that change has depended on the perception that the Gulf is stable and secure. And Iran has damaged that perception.”
— Greg Karlstrom (04:18)

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3. Future Scenarios for Regional Stability

Timestamps: 04:18—05:36

• Whether Iran’s disruption has permanently damaged the Gulf’s image depends on the outcome of the war and, crucially, on US political leadership.
• There’s skepticism that a comprehensive peace or a full return to conflict is imminent; a tenuous, risk-laden interim deal is most likely.
• The Gulf faces three challenges ahead:
  1. Rebuilding confidence
  2. Rethinking economic diversification at a time of higher risk
  3. Navigating geopolitics amid diminished trust—both internally and with the US

Memorable Quotes:

“It’s going to leave them with three challenges. They will have to rebuild confidence. They will have to rethink what it means to diversify their economies at a time of elevated risk. And they will have to navigate the geopolitics of a moment where they don’t trust each other. And they also have lost trust in America as well.” — Greg Karlstrom (05:18)

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4. Which Gulf States Are Most Ready?

Timestamps: 05:36—07:11

• The UAE is better positioned than others: no mass expat exodus, strong financial resources, proactive government response, and plans to reduce reliance on the Strait of Hormuz.
• Bahrain, in contrast, faces deep economic vulnerabilities exacerbated by the conflict, and is likely to need ongoing bailouts from richer Gulf peers.
• Other Gulf states lack alternatives to the Strait, which impacts their ambitions in tourism and business diversification.

Memorable Quote:

“They have lots of fiscal firepower...and they have alternatives to the Strait of Hormuz. So they’re in a much better position than a country like Bahrain...”
— Greg Karlstrom (06:08)

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5. Accelerating Economic and Strategic Transformation

Timestamps: 07:11—08:10

• The crisis is speeding up trends already underway, prompting Gulf states to invest more in:
  • Defense and logistics, such as new ports and pipelines
  • Food security, including hydroponic farms and other agri-tech
• Anticipate less investment in ambitious, image-focused projects (e.g., ski resorts, sci-fi cities), and more on hard infrastructure and resilience.

Memorable Quote:

“Probably less money going into ski resorts in the desert and sci-fi cities on the Red Sea coast... The other lesson... is that they need to be more united going forward.”
— Greg Karlstrom (07:58)

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6. Prospects for Gulf Unity

Timestamps: 08:10—08:56

• The crisis has exposed and deepened divisions among Gulf states, with different stances toward Iran and insufficient military coordination (e.g., no integrated air defenses).
• Despite US appeals for collective security, each Gulf country seems to be charting its own path rather than forming a unified bloc.
• Skepticism abounds that these divisions will be bridged any time soon.

Memorable Quote:

“Each of the Gulf countries is probably too small and too weak to confront Iran on its own. So this should be a moment...where you would think the Gulf gets together... But if past is prologue here, I think it may end up deepening those divisions and we’ll see each Gulf country going its own way.”
— Greg Karlstrom (08:38)

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Notable Quotes & Moments (With Attribution):

• Jason Palmer:
  • “That uncertainty, for Iran and for all its regional neighbors, may be the most potent and lasting harm of this war.” (01:47)
• Greg Karlstrom:
  • “All of that growth, all of that change has depended on the perception that the Gulf is stable and secure. And Iran has damaged that perception.” (04:18)
  • “It depends on how the war ends, if the war has ended. And that depends a lot on Donald Trump. I hate that that is the answer to almost every question in global politics these days, but it’s really true here.” (04:21)
  • “It’s going to leave them with three challenges. They will have to rebuild confidence. They will have to rethink what it means to diversify their economies at a time of elevated risk. And they will have to navigate the geopolitics of a moment where they don’t trust each other. And they also have lost trust in America as well.” (05:18)
  • “There are no signs that there’s been a mass exodus of expats from Dubai or elsewhere. People speak pretty positively about the way the government defended the country from Iranian attacks.” (06:00)
  • “Each of the Gulf countries is probably too small and too weak to confront Iran on its own. So this should be a moment... But if past is prologue here, I think it may end up deepening those divisions and we’ll see each Gulf country going its own way.” (08:38)

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Segment Timestamps for Quick Reference

• Ceasefire Uncertainty & Overview: 01:13—02:10
• Historical comparison: 02:10—04:18
• Perception of Stability: 04:18—05:36
• Gulf State Readiness: 05:36—07:11
• Changing investment priorities: 07:11—08:10
• The Divided Gulf: 08:10—08:56

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Tone & Language:

The discussion remains analytical, data-driven, and cautious, with Greg Karlstrom balancing optimism about some states’ resilience with skepticism about broader regional unity and future risk mitigation.

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Summary Takeaways

• The war with Iran has created a persistent sense of risk in the Gulf, undermining the perception of long-term stability that underpinned the region’s economic boom.
• Gulf states are unevenly prepared for this new era—those with deeper pockets and infrastructure flexibility (like the UAE) are better placed to adapt, while others (like Bahrain) face protracted financial difficulties.
• The conflict is catalyzing strategic shifts: away from prestige mega-projects and toward essential defense and resilience investments.
• Despite clear incentives, longstanding rivalries and differing attitudes toward Iran make further regional integration unlikely.
• Ultimately, the Gulf’s future hinges not just on local politics or military might, but on the evolving and unpredictable relationship between the US and Iran.

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[End of summary]

Transcript

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[Jason Palmer]

The economist. Hello and welcome to the intelligence from the economist. I'm jason palmer.

[Rosie Blore]

And I'm rosie blore.

[Jason Palmer]

Today on the show, our America at 250 series concludes and how plants use the sound around them. First up though,

[Questioner/Interviewer]

Okay, how about a

[Iran-related Commentator]

couple of quick questions on Iran?

[Narrator/Reporter]

On Iran, Mr. President. Wait, you said that Iran violated the ceasefire. Will they face any consequences?

[Iran-related Commentator]

You'll find out.

[Jason Palmer]

You'd hardly have known over the weekend there was an Iran war ceasefire in place.

[Iran-related Commentator]

I don't like the fact that they took a shot.

[Jason Palmer]

Day after day attacks on and from

[News Reporter]

Iran, attacks on US Allies Bahrain and Kuwait, an apparent response to US Central Command confirming airstrikes on Iran overnight.

[Jason Palmer]

It's also hard to figure out the state of negotiations between America and Iran. American officials said there would be more high level talks in Qatar this week. Iran's deputy foreign minister said yesterday that there wouldn't. In short, it's all still uncertain. And that uncertainty, for Iran and for all its regional neighbors, may be the most potent and lasting harm of this war.

[Greg Karlstrom]

The Gulf states aren't total strangers to conflict. They went through the tanker wars in the 1980s. They endured Saddam Hussein's occupation of Kuwait in 1990.

[Jason Palmer]

Greg Karlstrom is a Middle east correspond for the Economist.

[Greg Karlstrom]

And yet I think in many ways you could argue this is the greatest shock the Gulf has ever been through. Even though the consequences of this war might seem less visible than previous ones,

[Interviewer/Host]

the consequences have, on the basis of our conversations over those four months alone, seemed pretty visible.

[Greg Karlstrom]

Greg, yes and no. You've had thousands of Iranian missile and drone strikes on Gulf states and they've caused tens of billions of dollars in damage. But mercifully they killed very few people. Compare that to the invasion of Kuwait, for example, when hundreds of Kuwaiti civilians were killed. We haven't seen anything like that this year. And despite the closure of the Strait of Hormuz, even though you could bring almost nothing through for four months, we haven't seen shortages in the Gulf. Countries in this region have spent huge amounts of money to keep shelves stocked and to keep their economies somewhat functioning. So they've managed to blunt the most direct impact of the war for their residents. But this war comes at a time when the Gulf is a very different place than it was in the 1980s or the 90s. Back then, it really was the world's petrol station. Dubai was a sort of sleepy trading town on the coast. It wasn't yet a household name. Saudi Arabia was a dour place that didn't even offer tourist visas. Today, it's something much different. It's a huge player in everything from finance to logistics. Some the world's biggest airlines are in this region, some of the world's biggest sovereign wealth funds. You have millions of expats who have moved here over the years, drawn by low taxes and stability and the opportunity to start businesses and settle down. It's a very different region than it was. But all of that growth, all of that change has depended on the perception that the Gulf is stable and secure. And Iran has damaged that perception.

[Interviewer/Host]

By which you mean sort of permanently damage that perception.

[Greg Karlstrom]

It depends on how the war ends, if the war has ended. And that depends a lot on Donald Trump. I hate that that is the answer to almost every question in global politics these days, but it's really true here. If America and Iran can get to a lasting deal that ends their state of hostilities, then I think the Gulf could move on from this quite quickly. That perception of risk in the region will dissipate. On the other hand, if the deal falls apart and we see a return fighting between America and Iran, we could see even more destructive Iranian attacks in the Gulf. And obviously that would have far worse consequences. When I talk to people in the region, though, the expectation that most have is that we won't see either of those outcomes. We will see this interim deal remain in effect, but no broader transformative peace between America and Iran. And that is going to leave the Gulf with an elevated level of risk for the foreseeable future. And it's going to leave them with three challenges. They will have to rebuild confidence. They will have to rethink what it means to diversify their economies at a time of elevated risk. And they will have to navigate the geopolitics of a moment where they don't trust each other. And they also have lost trust in America as well.

[Interviewer/Host]

And so what's your take on Gulf countries readiness to tackle all three of those things?

[Greg Karlstrom]

No one is entirely prepared for it, but you have some countries that are much better positioned than others. I would say at one end of the spectrum is a country like the uae, where first there are no signs that there's been a mass exodus of expats from Dubai or elsewhere. People speak pretty positively about the way the government defended the country from Iranian attacks. So there seems to be confidence within the expat population. They have lots of fiscal firepower to prop up their economy, to offer incentives to try and woo back tourists and business travelers, and they have alternatives to the Strait of Hormuz. They're planning to expand ports and build new pipelines and look for ways to, to bypass the strait. So they're in a much better position than a country like Bahrain, which went into the war with one of the highest debt to GDP ratios in the world, with limited foreign reserves. Those problems have been exacerbated by the war. Bahrain hasn't been able to export oil, which has strained its finances. It's probably going to rely on bailouts from its Gulf neighbors for some time to come now. And so I think it's going to be very difficult for Bahrain to try and grow its economy going forward. And then you have a lot of countries that are somewhere in the middle. And I think what we've seen over the past four months, particularly because those countries don't have alternatives to the Strait of Hormuz, I think it's going to make it harder for them to position themselves as tourism hubs or hubs for business or look for ways to diversify away from hydrocarbons.

[Interviewer/Host]

So in a lot of ways, this war has made at least some of these Gulf countries work on changes that were kind of already underway.

[Greg Karlstrom]

It's going to speed them up and it's going to perhaps take them in a different direction. I think one lesson for the Gulf from these past few months is they need to invest a lot more money in strategic sectors to try and mitigate this newfound risk that they face. So I think you're going to see a lot of investment in defense, in logistics, building these ports and pipelines and things to bypass the Strait of Hormuz. Food security is going to be a big conversation. Hydroponic farms and other ways to try and grow food. I think you're going to see a lot of money pouring into that and probably less money going into ski resorts in the desert and sci fi cities on the Red Sea coast and the sorts of things that they were focused on before. The other lesson from this, and it's one that I'm skeptical the Gulf states will actually learn is that they need to be more united going forward.

[Interviewer/Host]

What do you mean by that?

[Greg Karlstrom]

What we've seen over the past few months indeed is that Gulf countries have very different views of Iran. Some want to try and reconcile with it now, others think it's a threat and they're focused on trying to contain it. And they don't trust one another. We've seen even their air defenses over the past few months have not been properly integrated. Despite years and years of pleas from the Americans. Each of the Gulf countries is probably too small and too weak to confront Iran on its own. So this should be a moment where you would think the Gulf gets together and comes up with a unified position and tries to harden its defenses vis a vis Iran. But if past is prologue here, I think it may end up deepening those divisions and we'll see each Gulf country going its own way.

[Jason Palmer]

Greg, thanks very much as ever for joining us.

[Greg Karlstrom]

Thank you, Jason.

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[Rosie Blore]

As you most certainly know by now, America celebrates its 250th birthday this weekend. In recent months, we've been diving deep into the Economist's own archive to chart American history through the lens of our past coverage. Now our final chapter brings us to the current day.

[Iran-related Commentator]

Today there is unprecedented turmoil in our capital markets.

[Narrator/Reporter]

Nobody years of risky subprime lending had helped inflate demand for housing.

[Rosie Blore]

Annie Crabel is a senior Digital Editor.

[Narrator/Reporter]

By 2007, house prices were falling. Soon many borrowers began to default. Mortgage backed securities lost value and banks were hit hard.

[News Reporter]

Lehman Brothers is going bankrupt. And financial markets from Asia to Europe are doing their utmost to prevent Monday from turning from dark to black.

[Narrator/Reporter]

As banks began to collapse, the financial system seems seemed on the verge of unraveling. The Bush administration proposed a $700 billion bailout, largely an attempt to protect those institutions deemed too big to fail. The crisis triggered the worst global recession since the Great Depression.

[Barack Obama]

I stand here today humbled by the task before us.

[Narrator/Reporter]

In November 2008, America elected its first black president. Barack Obama seemed to embody what commentators called post racial America. The vast majority of African Americans thought that his election would improve race relations. That was the hope, anyway. Antipathy towards Obama and his policies fueled a new populist movement called the Tea Party, which would reshape the Republican Party. Conservative media amplified the baseless claim that Obama had not been born in the United States, a conspiracy theory that Donald Trump, then a reality television star, enthusiastically supported.

[Iran-related Commentator]

It's a real possibility, much greater than I thought. Two or three weeks ago, then he has pulled one of the great cons in the history of politics.

[Narrator/Reporter]

In 2012, a 20 year old man armed with a semiautomatic rifle walked into Sandy Hook elementary school and killed 20 young children and six adults before killing himself.

[Barack Obama]

The majority of those who died today were children, beautiful little kids between the ages of 5 and 10 years old.

[Narrator/Reporter]

School shootings had already become a familiar problem. But the mass murder of children shocked the country and briefly raised hopes that Congress would pass tough gun laws. It did not. The Economist said, if even the slaughter

[Matt Kaplan]

of 20 small children cannot end America's infatuation with guns, nothing will.

[Narrator/Reporter]

In the decade after Sandy hook, there were 900 shootings on school grounds in America.

[Iran-related Commentator]

Ladies and gentlemen, I am officially running for President of the United States, and we are going to make our country great again.

[Narrator/Reporter]

When Trump announced his presidential campaign in 2015, few pundits gave him a chance of winning.

[Iran-related Commentator]

I'm using my own money. I'm not using the lobbyists, I'm not using donors. I don't care. I'm really rich. I'll show you that in a second.

[Narrator/Reporter]

But voters were in an anti establishment mood. He championed a new brand of nationalism that viewed foreign affairs as a zero sum game. He won, of course, and over his first term, he captured the Republican Party. He passed tax cuts that favored the wealthy and appointed three conservative justices to the Supreme Court. That court would later make historic decisions, including overturning Roe v. Wade. During Trump's first term, debates over sex, race and power intensified. The killing of George Floyd by a white police officer prompted another reckoning.

[Questioner/Interviewer]

Please. Please. I can't.

[Jason Palmer]

Please.

[Questioner/Interviewer]

Please, man, please.

[Narrator/Reporter]

Citing other instances of racism and police brutality, Millions marched under the banner Black Lives Matter. We were pretty understated in our coverage of COVID 19 when it first appeared in China around January 2020. But as we all know, it was not an understated event.

[Questioner/Interviewer]

I'm declaring a public health emergency of international concern over the global outbreak of novel coronavirus.

[Narrator/Reporter]

To slow it down, state and local governments imposed sweeping restrictions, which was a lot to absorb in liberty loving America.

[Protester]

I will not comply. I will not comply. I will not comply.

[Narrator/Reporter]

More than a million Americans died. Trump's handling of the pandemic did not inspire confidence.

[Iran-related Commentator]

And then I see the disinfectant, where it knocks it out in a minute, one minute, and is there a way we can do something like that? By injection, inside, or almost a cleaning?

[Narrator/Reporter]

Voters turned on him in 2020, favoring instead a veteran Democrat, Joe Biden, for president, despite the fact that he was well past retirement age. But Trump refused to concede, claiming falsely the election had been rigged. That culminated in a rally on January 6, 2021, after which his supporters stormed the Capitol.

[Protester]

We want Trump. We want Trump. We want Trump.

[News Anchor]

At this hour, our democracy is under unprecedented assault, unlike anything we've seen in modern times.

[Narrator/Reporter]

By that time, the Economist already had a podcast.

[Commentator]

The intelligence will last a very long time. It really was a watershed moment for American politics, and not in a good way.

[Narrator/Reporter]

When Biden took office, he presided over perhaps the most energetic American government in nearly half a century. But in 2024, it became clear to voters that Biden himself was not as energetic as his government. Capitalizing on high inflation, concerns about immigration, and short memories, Mr. Trump defeated Kamala Harris in the race for the White House. In his second term, Trump has doubled down on the policies of his first.

[Commentator]

New Orleans and Minneapolis are the latest targets of the Trump administration's federal immigration crackdown. You can see some live images towards

[News Reporter]

what President Trump has called America's Liberation Day. He says he will unveil a massive slate of import taxes. An Israeli defense official says the attack has been coordinated with the US and had been planned for months. Smoke can be seen coming from buildings in terror.

[Narrator/Reporter]

To paraphrase Ben Franklin, America is a republic if you could keep it. As the country marks its 250th birthday, the great liberal experiment is again under strain. In another 50 years, when America marks its 300th birthday, historians might look back at this moment and judge whether its citizens kept their republic.

[Rosie Blore]

We tend to think of hearing as a uniquely animal sense. We certainly know how to make a lot of noise. But scientists have long wondered if plants might be secretly listening in. A study in 2018 claimed that one species of Asian shrub grew larger leaves when exposed to Buddhist chants. Another last year found that the sound of traffic stunted the growth of marigolds. And for plants, as with the rest of us, hearing could prove useful.

[Matt Kaplan]

We have evolved in our understanding of how plants interact with sound quite a lot in recent years.

[Rosie Blore]

Matt Kaplan is a science correspondent.

[Matt Kaplan]

We used to Think that because plants don't have ears, they couldn't hear. But as time has progressed, we have increasingly found that plants most definitely are using sound to gain information about the world around them.

[Rosie Blore]

So if plants don't have ears, how are they using sound?

[Matt Kaplan]

So sounds are waves, they're energy waves and they cause vibrations. That's why even someone who is deaf can hear. And I put here in quotes bass from a really loud vehicle passing by, because the bass makes you shake. You feel it in your body. Plants have water inside them, and when waves of energy hit them, they vibrate. And plants can detect that. We didn't realize that they were making use of that information, but they do.

[Rosie Blore]

So what are they doing with that information then?

[Matt Kaplan]

So some of the most interesting research has demonstrated that when plants are being nibbled on by a plant eating insect, they can detect what kind of nibbles they are based upon the vibrations of the nibbler, and they can then respond accordingly. I mean, it's unbelievable the arsenal that plants have at their disposal. They can respond to attack by flushing their leaves with chemicals that make them taste terrible. But more interestingly, in recent years, we've discovered discovered that plants can release chemicals into the air that smell sweet to parasitic and carnivorous insects to come and eat the herbivorous insects that are on the plant. Plants do actually communicate to carnivores and say, hey, yo, I've got these really bad insects on me. Will you come and eat them? And of course, it's symbiotic for the predator because they get a meal, they're alerted by the plant.

[Rosie Blore]

So, Matt, if plants aren't just listening, but actually good at listening, are they also speaking in some form?

[Matt Kaplan]

So yes, plants do emit noises and they're created by bubbles, usually of air inside the plant's tissues. When different conditions are present, like there not being enough water or the tissues being damaged by infection, the bubbles get released or they collapse. And this causes small shock waves in the surrounding tissues that cause the plant to vibrate. That is what creates the sound. You and I can't hear them, but a microphone put at the right location absolutely can. And they sound like little pops. And what's more is the noises are distinct to different conditions. Virus infection versus drought versus being bitten or chopped.

[Rosie Blore]

Feel like you're opening up whole new areas of paranoia for plants to be eavesdropping on us. Aside from the weirdness and amazingness of all of this, why does it matter?

[Matt Kaplan]

Well, it raises all kinds of interesting possibilities. You know, farmers could put microphones in their field and listen into their crop and have that fed to a computer and have the computer alert them. We have these plants in this sector of the field that are suffering from, for example, mosaic virus, or this crop here is suffering from drought. Also, if you can communicate to those plants via sound, that's a really cheap way to potentially get your crops to do a specific thing. Right now our main go to for trying to keep pests off of wheat is to spray the wheat with pesticides. And we know from experience that those pesticides have knock on effects on you, me, our children. But if we have the option to shape a field by causing the plants to hear herbivores coming for them or to behave in a manner that leads carnivores to come and protect them, these are mechanisms that would not change the chemistry of the plant in a manner that makes us ill, but potentially make the plant a lot less interesting to the herbivores. So it's early days, it's the wild west in botany with this kind of stuff. But it's starting to show promise for a mechanism of changing the way we farm in a good way.

[Rosie Blore]

Matt, thank you so much.

[Matt Kaplan]

My pleasure, Rosie.

[Rosie Blore]

And thank you also to all our plant listeners out there.

[Jason Palmer]

That's all for this episode of the Intelligence. We'll see you back here tomorrow.