By Editorial Dept – Sep 19, 2025, 8:00 AM CDT

Israel

Israel is testing just how far Gulf partners will let it run amok in the region while equities and interconnects deepen. The UAE signal is the clearest: if Israel moves to annex the West Bank, Abu Dhabi is prepared to downgrade the normalization path, which could mean ambassadorial recall and visibility limits for Israeli defense firms for starters. That’s leverage, not rupture, and it’s already being floated to Washington as much as it is to Tel Aviv. 

The Saudi side of things is slower and more conditional. For Riyadh, any Saudi move towards normalization with Israel is tied more closely to a U.S. security package, nuclear file terms, and a real pathway on Palestine. None of which is likely near-term. 

Has Israel gone too far for the Gulf? Gaza and the recent Doha operation narrowed everyone’s room for maneuver, but the UAE model is to contain damage, not slam on the brakes. Unless annexation becomes an explicit policy for Israel, we don’t see normalization with Israel being completely derailed, but we do see it being slowed down, especially for the optics. 

Energy is the reason Israel thinks it can push further. When Israeli offshore output stutters, Egypt, for one, scrambles, with blackouts risks, fuel-oil burn jumps, LNG import bill spikes. With the new Nitzana pipeline plan and a multiyear, multibillion-dollar Egyptian import framework, you can see why Israel reads its gas as strategic leverage for regional bargaining.

So, for now, the assessment…

Israel is testing just how far Gulf partners will let it run amok in the region while equities and interconnects deepen. The UAE signal is the clearest: if Israel moves to annex the West Bank, Abu Dhabi is prepared to downgrade the normalization path, which could mean ambassadorial recall and visibility limits for Israeli defense firms for starters. That’s leverage, not rupture, and it’s already being floated to Washington as much as it is to Tel Aviv. 

The Saudi side of things is slower and more conditional. For Riyadh, any Saudi move towards normalization with Israel is tied more closely to a U.S. security package, nuclear file terms, and a real pathway on Palestine. None of which is likely near-term. 

Has Israel gone too far for the Gulf? Gaza and the recent Doha operation narrowed everyone’s room for maneuver, but the UAE model is to contain damage, not slam on the brakes. Unless annexation becomes an explicit policy for Israel, we don’t see normalization with Israel being completely derailed, but we do see it being slowed down, especially for the optics. 

Energy is the reason Israel thinks it can push further. When Israeli offshore output stutters, Egypt, for one, scrambles, with blackouts risks, fuel-oil burn jumps, LNG import bill spikes. With the new Nitzana pipeline plan and a multiyear, multibillion-dollar Egyptian import framework, you can see why Israel reads its gas as strategic leverage for regional bargaining.

So, for now, the assessment is that Abu Dhabi will keep the relationship with more conditionality. Riyadh will extend the timeline and raise the price. Israel leans on its gas position while testing boundaries it assumes the Gulf won’t cross. If things go much further, the UAE will move first with the downgrades (partly for topics), but it’s Egypt’s reaction that will serve as the most immediate barometer of Israel’s leverage.

In Gaza, Israel has pushed armor and infantry deeper into Gaza City, with a telecom blackout and evacuation corridors signaling intent to break Hamas’ central command structure while managing hostage risks. Civilian displacement is surging, hospitals are overwhelmed, and the humanitarian cost is climbing, but the IDF calculus is that sustained pressure in the urban core can erode Hamas’ operating depth. Parallel to this, eyes are on the northern front: Israel is weighing whether to escalate against Hezbollah in southern Lebanon. Limited strikes on missile and logistics nodes have already intensified, but the key watchpoints are reserve call-ups, supply movements to the northern theater, and rhetoric that shifts from deterrence to preemption. A second front would be high-cost, but Israeli planners believe their gas leverage and U.S. backing give them room to test thresholds while signaling to Gulf capitals that deterrence posture now extends north as well as south.