The United States and Iran reportedly will formally sign a memorandum of understanding in Geneva on June 19, reopening the Strait of Hormuz and setting a framework for further talks on a long list of thorny questions dividing the two countries. This is welcome news — but now comes the hard part. For a diplomatic deal to be sustainable, it must reflect the balance of power and interests of the main actors as well as those most affected by the conflict.
Prepare for a long, hot summer of unknowns in the Middle East. Even if the talks make progress, the many sticking points that diplomacy failed to address before the latest round of war are unlikely to be settled within the proposed 60-day timeline — these are issues the two countries have not resolved in decades.
Both sides have an interest in advancing the negotiations and avoiding further war: Iran is experiencing severe economic pain as a result of the conflict and the US-imposed naval blockade of its ports, and US President Donald Trump faces the reality that cost-of-living pressures are prompting even his most loyal supporters to question his priorities as he focuses on foreign affairs, rather than economic issues at home, less than five months before the midterm elections. With the inflation rate in America reaching a three-year high, President Trump tried to put the best face on it, saying he “loves the inflation” and insisting that oil prices will “come down like a rock” once the war ends. Even if this deal moves forward without any hitches, the global and domestic damage done by rising costs and shortages of key goods like fertilizers, food, and fuel that the war has inflicted on both producers and consumers is already baked in and will take months, if not years, to reverse.
Time will tell if prices drop, and much will depend on whether ongoing talks succeed in rebuilding the necessary trust between the two main parties. Another key variable is whether this summer’s diplomacy produces a new regional and global landscape that restores confidence in American leadership among the many countries affected by the 2026 Iran war.
As the Trump administration deals with the urgent short-term issues related to Iran, it should also draw lessons from this war by working to build a more proactive strategy to engage partners in the region, advancing cooperative efforts to deepen regional connectivity and integration in the long run.
Regional Economic Powers Adapt by Investing in Resilience
The impact of the 2026 Iran war so far has largely been a net negative for US national security interests and regional stability — and it remains to be seen whether the diplomatic framework that the Trump administration has developed with the aid of Pakistan and Qatar will generate positive outcomes for the rest of the Middle East.
But one impact the war has already had is to incentivize many countries in the region to rapidly adapt their economic and commercial strategies to reduce their dependence on access to the Strait of Hormuz. After Iran mostly closed this crucial maritime chokepoint in the early days of the war and the following weeks were filled with start-stop diplomacy, some of the wealthiest regional countries moved quickly to adapt their approaches to remain connected to the global economy. This was a particular priority for the Gulf states that have mapped out ambitious economic transformation plans over the past decade and have made these investment goals a central part of their national security strategies.
The disequilibrium caused by this latest Iran war led America’s Gulf partners to adjust their trade and supply lines, supplement existing corridors, and step up global investments to diversify their portfolios and enhance their economic security. Some of these projects, like the India-Middle East-Europe Economic Corridor (IMEC), have long timelines, and many will require adaptation of the original plans and conceptions.
A brief sample of projects that either emerged or were prioritized in reaction to the instability brought about by the war includes:
- Expansion of pipeline networks. The United Arab Emirates announced it would accelerate the construction of its West-East Pipeline to circumvent the disruptions to global energy supply caused by Iran’s blockade of the Strait of Hormuz. This new pipeline, the second in the UAE that bypasses the strait, would double the country’s export capacity through the Port of Fujairah.Saudi Arabia also increased the flow of crude oil through its East-West Pipeline (Petroline), which bypasses the Strait of Hormuz by allowing exports from the Port of Yanbu on the Red Sea. In April, Saudi Arabia announced the pipeline had reached full operational capacity, carrying 7 million barrels per day (bpd).
In early June, the Iraqi cabinet approved accelerating crude oil exports via the Kirkuk-Ceyhan Oil Pipeline, which runs from Kirkuk in northern Iraq to the port of Ceyhan on Turkey’s Mediterranean coast. If this network were to operate at full capacity, Iraqi exports would more than triple, increasing from 220,000 to 770,000 bpd, alleviating pressure on its oil-dependent economy, though a long-running contract dispute with neighboring Turkey over the pipeline makes this unlikely.
- New connections between ports. Both the UAE and Saudi Arabia moved quickly in reaction to the closure of the Strait of Hormuz to increase the efficiency of trade and supply chain logistics. For example, the Sharjah Ports, Customs, and Free Zones Authority announced a multimodal platform, al-Dhaid Logistics Complex, connecting the UAE’s ports network on the western coast to the eastern coast, creating the opportunity for future linkage with Etihad Rail, and optimizing a corridor that connects Sharjah seaports with Omani ports. This complex provides more efficient logistics coordination across ports, border gateways, and distribution centers to optimize the flow of trade between the UAE, Oman, and Gulf Cooperation Council states. In addition, the Saudi Ports Authority and Gulftainer created a new corridor that combines maritime and land transit to maximize cross-border efficiency between Dammam and Sharjah and reduce dependency on maritime transit routes.
- New railway projects across the Arabian Peninsula. In April, the UAE’s national railway, Etihad Rail, and Jordan’s Ministry of Transport agreed to develop a joint railroad network as part of the UAE’s $5.5 billion investment package for Jordan announced in 2023. The new railway project will cost an estimated $2.3 billion and will reduce Jordan’s transport costs for critical resources (phosphate and potash); create jobs across the mining, transport, and logistics industries; and optimize logistics via the port of Aqaba.
Similarly, Saudi Arabia Railways launched an international freight transport corridor linking eastern ports in the kingdom to al-Haditha along the Jordanian border, allowing cargo to reach Jordan and other surrounding countries more effectively. This new route will halve shipping times compared to land transportation and will increase cargo capacity to other provinces and countries.
- Continued investments in major global economies, including the United States. The 2026 Iran war did not stop the stream of investments flowing from the Gulf into major global economies, especially the United States. For example, in the midst of this regional instability the UAE reaffirmed its commitment, announced during President Trump’s May 2025 trip to the Gulf, to invest $1.4 trillion in the US over the course of 10 years across different sectors, including power generation, energy infrastructure, and aluminum manufacturing.
These are just four illustrations of projects pursued by countries in the region despite the uncertainty produced by the Iran war — and this basic impulse to double down and deepen connectivity to the global grid is one that US policy should encourage and make a core part of its “long game” strategy for the Middle East into the 2030s.
Taking the Long View for US Policy in the Region
The deal that is scheduled to be signed this week between Iran and the United States, the details of which have not been disclosed, is unlikely to resolve all of the issues that existed before the war began, and analysts will debate for years to come the costs and benefits of this particular conflict. But the constructive reaction of many regional states to absorb the takeaways from this conflict and quickly adapt with an eye to the longer-term future is a model for US policymakers to follow.
As the Trump administration attempts to negotiate a more comprehensive deal with Iran that stabilizes the region, it should recognize that this diplomacy track will likely take far longer than the proposed 60-day timeline to play out. In parallel with addressing the pressing short-term issues, the administration should develop a long-term effort to encourage more regional and international investment and the creation of transnational transportation corridors and pipeline networks to support Middle Eastern countries as they seek to become increasingly diversified regional and global centers for energy, transit, and trade.
For example, Syria’s integration into the regional and global economy should be a top priority for US policy. One of the biggest strategic challenges Damascus faces is the economic pain its people are experiencing, and greater connectivity to the region could help to address that by facilitating economic growth. Integrating countries like Syria as part of this bigger piece of the puzzle could aid in mapping out longer-term strategies at a time of maximum insecurity about US policy in the short term.
On Lebanon, if a US-Iran deal successfully encompasses a resolution between Israel and Hizballah and reduces the risk of a slide back into broader conflict, the United States should finance and invest in projects related to the nation’s infrastructure, transportation, and natural gas potential through offshore exploration. Risk mitigation will be critical to securing investments in Lebanon, but once achieved, it will offer a valuable opportunity for the US and regional partners to facilitate the country’s integration into the regional and global economy.
These ideas could be a way to engage key regional partners, including the ones President Trump visited when he highlighted the Gulf’s economic potential during his May 2025 trip to Saudi Arabia, Qatar, and the UAE.
This approach could focus on creating new discussions about how to expand concepts like IMEC to include more countries and to bolster supply chain security and resiliency. IMEC was developed during the Biden administration and officially announced at the G-20 summit in India in September 2023, but the Trump administration has also supported the initiative.
Many of these projects stretch well into the 2030s and will not offer immediate relief from pressing problems, including the economic pain created by the 2026 Iran war. But laying out a longer-term view — one informed by the conflict’s lessons about the vulnerability of key chokepoints like the Strait of Hormuz — would help build a more stable region with greater incentives to strengthen connectivity. The war forced regional states to make their energy, transit, and trade systems more flexible and efficient out of necessity, and they should keep building on those gains even if a final US-Iran agreement is reached. Going forward, the US should leverage this momentum, facilitating similar agreements and investments between regional partners in other sectors to make the region more diversified, resilient, and interconnected. That would serve both US and regional security and economic interests over the long run.
Brian Katulis is a Senior Fellow at the Middle East Institute.
Athena Masthoff serves as the Senior Research Assistant in the Policy Center.
Photo by AFP via Getty Images
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