The Q1 2026 budget report records the moment Saudi Arabia structurally broke from the oil revenue model and crossed into a debt-financed deficit economy. The Iran war is the immediate trigger. The architecture was prepared for the transition before the first missile crossed Saudi airspace in February. The numbers describe a kingdom now permanently dependent on issuance for the spending the oil line can no longer fund, with a productive base damaged by war, and a fiscal arithmetic that does not return to balance under any horizon the budget can credibly model. The crossroad the regime is at is not whether to choose between austerity and growth. It is whether to acknowledge that the model has changed or to keep running the financialisation programme until the markets force the change.

The headline carries the case. Q1 revenue fell 1% year-on-year to SAR 261 billion. Q1 expenditure rose 20% to SAR 386.7 billion. The deficit closed at SAR 125.7 billion, consuming 76% of the SAR 165 billion full-year deficit projection in three months. The 2025 outturn ran the same gap in starker form. The original 2025 budget projected a deficit of SAR 101 billion. The actual 2025 deficit, reported for the first time in this document, came in at SAR 276.6 billion. That is a 174% overshoot from the original budget, and roughly 12% above the mid-year revised estimate. The 2026 budget projects spending will fall 5.4% year-on-year. Q1 spending is up 20% year-on-year. The variance from the budget is already 25 percentage points after one quarter. The annual deficit ceiling is practically a fiction.

The revenue base has been structurally impaired

The oil revenue at SAR 144.7 billion is down 3% year-on-year, a number that understates the structural impairment beneath it. Pre-war Saudi exports through Hormuz averaged 6 to 7 million barrels per day. The strait was effectively closed by Iranian Revolutionary Guard action from 4 March, with crude flows through it falling from around 20 million barrels per day system-wide to just over 2 million during March. The East-West pipeline to Yanbu runs at 4 to 4.5 million barrels per day at ceiling. Even pushing alternative routes to maximum, including Bahrain crossover and Eastern Province crude rerouting, exportable Saudi volume sits at 5 to 5.5 million barrels per day, a 25 to 35% reduction sustained for as long as Hormuz remains functionally closed. The 7 April ceasefire is a paper instrument. Insurance markets have not normalised premiums on Hormuz transit. Ships are still being turned away. The strait is not open in any operational sense. The Q1 oil number captures only the early weeks of disruption. Q2 will absorb the first full quarter of impaired exports and will come in materially below the Q1 line. Full-year oil revenue probably lands around SAR 440 to 460 billion against pre-war run-rate of SAR 580 to 600 billion. That is a SAR 145 to 150 billion permanent revenue gap before any other variable moves.

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There is a strategic logic to what the US has spent the past several months doing in the Middle East, Latin America, Eurasia, and Southeast Asia that goes well beyond the stated objectives of any single operation. Taken together, the seizure of Venezuelan oil infrastructure in January 2026, the war on Iran, the Ukrainian attacks on Russian tankers and refineries, and the Major Defense Cooperation Partnership signed with Indonesia on 13 April 2026 constitute a coherent programme of energy encirclement directed at one target: China. This is not a war about Iran only. Iran is the instrument. The war is strategically about China.

The Geometry of Encirclement

China imports roughly 11 million barrels of oil per day. Iran, before the war, supplied around 87% of its exports to China at heavily discounted prices, accounting for approximately 1.5 million barrels per day of Chinese intake. Venezuela, whose largest customer was China through a debt-for-oil arrangement that had been running for over a decade, sent 55% of its crude to Beijing before Maduro’s removal in January 2026. Russia, through Rosneft and Lukoil, supplied as much as 20% of Chinese crude imports – roughly 2 million barrels per day – before US sanctions in late 2025 forced Chinese state refiners Sinopec and PetroChina to cancel shipments, affecting nearly 45% of Russia’s crude flows to China. China’s imports from other Gulf countries through Hormuz were also impacted.

In the space of less than four months, Washington has moved to simultaneously tighten or complicate access to China’s most important oil suppliers. Russian supplies were disrupted by the Ukrainian attacks on Russian tankers and refineries. The Strait of Malacca, through which 40% of global trade flows and the vast majority of China’s seaborne energy imports travel, is also scrutinised. The US-Indonesia defence pact, signed last week, expands joint operational access to Indonesian airspace, deploys American surveillance sensors along the strait, and integrates Washington’s monitoring architecture across the waterway. China now faces a coherent chokepoint strategy stretching from the Caribbean to the Persian Gulf to the South China Sea. That is not coincidence. That is a doctrine.

The Venezuela piece is particularly revealing because it was done without a shot being fired at China directly. Washington extracted Maduro, handed control of oil revenues to a US-aligned transitional authority, and then issued the studied message that Beijing could continue purchasing Venezuelan crude – but at market prices, not the discounted rates that had serviced Chinese debt. The US effectively transformed China’s largest South American oil relationship from a strategic asset into a dollar-denominated commercial dependency supervised by Washington. China’s “teapot” refiners, the private processors that handle the bulk of sanctioned crude, are no longer just commercial actors. They have been reclassified as strategic vulnerabilities whose survival depends on US political tolerance.

The Deindustrialisation Thesis

The precedent for what Washington is attempting with China was already demonstrated on Europe. When Nord Stream was destroyed in September 2022, Germany lost the industrial foundation that had made its manufacturing sector the engine of European growth. Cheap Russian gas had underwritten everything from BASF’s chemical production to the competitiveness of German steel. With it gone, Germany’s deindustrialisation accelerated into a structural collapse: electricity costs surged to among the highest in the developed world, major firms relocated production, and the country’s GDP contracted for two consecutive years. Europe’s industrial base, once Washington’s peer competitor in advanced manufacturing, now depends on US LNG at US-determined prices.

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The same week Indonesia signed a major defence cooperation partnership with the US at the Pentagon, its president sat with Vladimir Putin at the Kremlin for 5 hours negotiating Russian oil. That is the Indonesian story in a single photo. Not multi-alignment. Not strategic hedging. The war on Iran has made all of its contradictions visible at once.

On 13 April 2026, the US and Indonesia formalised the Major Defense Cooperation Partnership at the Pentagon. It covers military modernisation, joint exercises in maritime and subsurface domains, autonomous weapons co-development, and expanded special forces training. Washington is simultaneously seeking blanket overflight access for US military aircraft through Indonesian airspace, giving the US direct surveillance capability over the Strait of Malacca, the world’s busiest chokepoint for oil and petroleum liquids. Jakarta says the proposal is still under review. Multiple Indonesian outlets reported that Prabowo had already approved it.

On the same day, Prabowo was in Moscow. He spent 2 hours in bilateral talks and 3 hours alone with Putin. The outcome was a long-term energy and mineral resources cooperation agreement, covering oil and gas supply, downstream processing, and what Jakarta now frames as energy resilience. Russia has received a formal request from Indonesia for oil product supplies. Prabowo told Putin he had come to “consult” because “the global geopolitical situation is evolving and changing very rapidly.” This is the 5th meeting between the 2 leaders in a single year.

From Moscow, Prabowo flew directly to Paris to meet Macron. The 3 meetings in 72 hours tell you everything about where Indonesia is and where it is not. It is everywhere. It is anchored nowhere.

Buying everything, choosing nothing

The military procurement alone reveals the depth of the contradiction. Indonesia is now acquiring or has committed to 42 Rafales from France, 48 5th-generation KAAN stealth fighters from Turkey, 42 J-10s from China, 16 KF-21 Boramae from South Korea, and has a freshly signed defence partnership with the US covering autonomous systems and next-generation technologies. That is 5 fighter platforms from 5 countries across 4 geopolitical blocs, with zero interoperability between any of them. The finance ministry cleared $3.1 billion in foreign loans for Chinese military equipment alone, including CM-302 coastal anti-ship missiles. The defence budget for 2026 is 187.1 trillion rupiah.

This is not diversification. Diversification implies a strategic logic where different suppliers reduce dependency on any one of them. What Indonesia is doing is accumulating bilateral defence relationships as political signals to each partner, without a unifying operational concept. The J-10 deal signals to Beijing that Jakarta takes Chinese military technology seriously. The MDCP with Washington signals that Jakarta remains inside the US security architecture. The Rafale signals European sophistication. The KAAN signals solidarity with Turkey and the emerging non-Western defence industrial base. Each deal makes sense on its own. Together they describe a country that has not decided whether it is a US security partner, a Chinese economic client, a BRICS strategic actor, or a non-aligned middle power. It is currently all 4 simultaneously. The war has made that position untenable.

The Hormuz shock and the scramble for oil

The closure of the Strait of Hormuz since 28 February has exposed Indonesia’s most dangerous structural weakness. The country is a net oil importer with 20 days of domestic reserves. Around 25% of its crude imports transit through Hormuz. Over 50% of the world’s nickel is produced in Indonesia, and 75% of the sulphur required for nickel processing comes from the Middle East through the same waterway. When Iran shut the strait, Indonesia lost access not just to fuel but to the chemical inputs that sustain its most strategically valuable export commodity.

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Turkey is being positioned as the war’s biggest winner before the war has even ended. The logic is seductive. Iran is degraded. Israel is overstretched. The Gulf is paralysed. And Turkey, the region’s largest NATO power, sits outside the blast radius with a booming defence sector But the assumption that Ankara will simply absorb Iran’s regional weight mistakes proximity for inheritance. Turkey’s strategic position has improved. Its structural vulnerabilities have deepened at the same time. The net outcome is far less certain than either triumphalists or catastrophists suggest.

The short-term damage is real and measurable. The Borsa Istanbul dropped 7% on the morning of the strikes. Foreign investors liquidated between $25 billion and $30 billion in Turkish assets in the first weeks of the conflict, moving into dollars as emerging market risk appetite collapsed. The central bank burned through more than $40 billion in reserves in a matter of weeks to stabilise the lira. Inflation remains above 30%, well beyond the government’s 16% year-end target. Every $10 increase in oil prices adds roughly $5 billion to Turkey’s current account deficit. The roughly $30-per-barrel rise since the start of the year, if sustained, would add $15 billion to the gap. Turkey’s 3-month trade deficit through March hit nearly $29 billion, suggesting the 2026 total could eclipse last year’s $92 billion. Industrial capacity usage fell to its lowest level since August 2020. This is not the profile of a country coasting to victory.

Tourism, a critical hard-currency earner that brought in $65 billion in 2025 on 53 million visitors, is under direct pressure. Bookings from Germany are down. Iranian tourist flows to the eastern border city of Van have stopped. Turkish Airlines and Pegasus have halted flights to Iran, the UAE, Jordan, Lebanon, Syria, and several Gulf destinations. Jet fuel prices have surged over 100% compared to a month before the war began. Estimates suggest Middle Eastern tourism could decline 11% to 27% in 2026. The government’s $68 billion revenue target for the sector now looks unreachable. Three Iranian missiles have entered Turkish airspace since February 28, all intercepted by NATO systems. The US closed its consulate in Adana and advised citizens to leave southeastern Turkey. For a tourism sector that depends on perceived safety as much as actual safety, these are not trivial signals.

The strategic upside

And yet the structural opportunity is undeniable. A weakened Iran removes the single most capable non-Arab Muslim power from the regional chessboard. What remains is Turkey. By geography, by military capacity, by NATO membership, and by industrial base, Ankara becomes the dominant actor adjacent to the Levant, the Caucasus, the Black Sea, the Gulf, and North Africa simultaneously. No other state in the region holds that combination.

The defence sector is the clearest expression of this positioning. Turkey’s domestic defence production rate now exceeds 80%, up from roughly 20% two decades ago. Defence and aerospace exports surpassed $10 billion in 2025, a 48% year-on-year increase. 5 Turkish companies sit in the global top 100 defence firms. The KAAN 5th-generation fighter programme is moving toward serial production with 48 units already contracted to Indonesia and serious interest from Egypt and Saudi Arabia. The Steel Dome multilayer air defence system, led by Aselsan with Roketsan and other national firms, has already delivered over 100 components to the Turkish armed forces. A further $1.92 billion package secures deliveries through 2031. The 2026 defence budget stands at $27.3 billion, a 33.9% increase over 2025, with more than 1,000 active projects worth nearly $100 billion. Ammunition production capacity has been scaled from 4,000 units to 65,000 annually, targeting 1 million by 2028. Turkey is not merely arming itself. It is building the industrial capacity to arm others in a region that has just witnessed its existing security architecture shattered.

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The Islamabad ceasefire announced this week is not a return to the status quo but the inaugural act of a new regional order defined by ledger dominance. While global attention remains fixed on the temporary suspension of kinetic strikes, the real revolution is occurring in the maritime law of the Gulf. The proposal to institutionalise transit fees for the Strait of Hormuz represents the final collapse of the post-1945 security architecture, where the US Navy underwrote the free flow of energy as a global commons. By converting a natural waterway into a sovereign toll booth, Tehran is effectively nationalising the primary artery of global industrial life. This is not a desperate grab for liquidity by a sanctioned state; it is a fundamental restructuring of the political economy of the Middle East, where the ability to disrupt is being formalised into a permanent right to invoice. This is important because it may also incentivise Houthis to try to financialise their geopolitical location to monetise Red Sea access, creating a global rippling effect.

Ledger dominance and the privatisation of the global commons

For 8 decades, the Strait of Hormuz operated under a security escrow. Capital markets assumed that the cost of passage was zero because the US taxpayer covered the bill for regional stability. The 2026 conflict has exposed the terminal fragility of this arrangement. The move to charge up to 2,000,000 USD per tanker is the logical conclusion of a decade of maritime grey-zone warfare. It transforms the Islamic Revolutionary Guard Corps from a paramilitary force into a maritime central bank. If this fee is successfully codified, it sets a precedent that will inevitably be mirrored in the Bab el-Mandeb and potentially the Strait of Malacca. The world is moving from a system of guaranteed access to a system of sovereign subscriptions, where the security of a vessel is no longer a public good but a private service provided by the local hegemon. This shift has already seen maritime war risk insurance premiums surge by as much as 1,000% in certain cases, forcing states like India to consider 1,500,000,000 USD sovereign guarantee funds just to keep their trade flows moving.

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The war on Iran is not primarily about regime change, nuclear weapons, or regional stability. It is a currency war. The question at the centre of this conflict is whether the dollar or the yuan will invoice global trade for the next generation. Everything else is theatre around that structural contest.

When Operation Epic Fury launched on 28 February, Iran had already built something Washington could not tolerate. In January 2025, Tehran and Moscow signed a 20-year comprehensive strategic partnership treaty that formalised the elimination of the dollar from bilateral trade. By late 2025, over 80% of Iran-Russia trade was conducted in rials and roubles. Iran, China, and Russia signed a trilateral strategic pact in January 2026 explicitly designed to bypass SWIFT and construct alternative financial mechanisms. The infrastructure was operational before a single bomb fell. This was not hypothetical dedollarisation. It was a functioning parallel financial architecture.

The US did the same thing in Venezuela weeks earlier. Caracas had been selling the vast majority of its heavy crude to China in yuan and had joined BRICS-adjacent payment channels to circumvent the dollar. On 3 January 2026, Washington invaded, extracted the president, and immediately redirected Venezuelan oil sales back into dollar-denominated channels. The pattern is unmistakable. States that dedollarise their energy exports face military intervention. Iraq did it in 2000 with euros. Libya attempted it. Venezuela did it with yuan. Iran built the most advanced non-dollar energy payment system on earth and now finds itself under the largest sustained aerial bombardment since 2003.

The yuan corridor through Hormuz

Iran’s most consequential move has not been military. Since the closure of the Strait of Hormuz in early March 2026, Tehran has offered selective passage to tankers on one condition. Oil cargo must be invoiced in Chinese yuan. At least 2 vessels have already settled transit fees in yuan through a Chinese maritime intermediary. The fee structure is roughly $1 per barrel, meaning a single VLCC passage generates nearly $2 million in yuan-denominated revenue. Iran is also accepting stablecoin cryptocurrency payments, building a parallel digital settlement layer alongside the yuan channel with access to dollars.

This transforms the Strait from a shipping lane into a currency tollbooth. The practical consequence is a bifurcated global oil market. Yuan-denominated barrels flowing through Hormuz via China’s Cross-Border Interbank Payment System and dollar-denominated barrels rerouted at vastly higher cost for those refusing to settle in Chinese currency. Approximately 20% of global oil and gas shipments transited Hormuz in peacetime. That volume is now held hostage to a currency denomination question. The war premium that Western energy importers are absorbing is no longer temporary. It is becoming structural.

Iran chose the yuan deliberately. It did not demand roubles, despite the depth of its partnership with Russia, because Iran’s greatest trade deficit is with China. Beijing purchases the vast majority of Iranian oil exports and has done so for over a decade, settling in yuan since at least 2012. The rouble would have been geopolitically symbolic but economically useless for Tehran. Iran needs a currency it can spend, and it spends overwhelmingly in the Chinese economy. The yuan is not just a protest currency for Iran. It is the functional medium of its commercial survival.

The rouble, by contrast, is what Russia uses for its own purposes. Moscow internationalised rouble usage after the 2022 Ukraine war, pushing bilateral settlements in roubles with India, Turkey, and across Central Asia. But the Ukraine war also triggered a wave of redollarisation as frightened capital flooded back into dollar assets for safety. The dollar index surged. Treasury demand spiked. The same paradox is now playing out with Iran. The dollar index broke through to 2026 highs in the war’s opening weeks, testing 99.50, because energy importers worldwide scrambled to acquire dollars to pay for expensive crude. The short-term effect of every dedollarisation war is to strengthen the dollar temporarily while weakening it structurally.

Who profits in Washington

The domestic US political economy of this war is rarely discussed, but it matters enormously. The war is costing approximately $900 million per day in military operations. US national debt reached $39.01 trillion on 26 March 2026, growing by roughly $1 trillion every 100 days. Annual interest payments now exceed $1 trillion, surpassing the entire pre-war defence budget. The administration has proposed raising the 2027 defence budget to $1.5 trillion. All of this requires continued global demand for the dollar and for US Treasury securities.

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The Knesset approved Israel’s 2026 state budget in the early hours of Monday morning, 62 votes to 55, with Iranian missiles landing on Israeli soil as lawmakers cast their ballots. The government framed it as a historic act of fiscal governance under fire. It is, in reality, a document built on accounting assumptions that the trajectory of this war is already destroying. The budget passed. The reckoning has not.

The approved NIS 699 billion package carries a 4.9% deficit ceiling, up from the 3.9% announced when the cabinet signed off in December. Government expenditure is growing at 8.8%. The defense budget now stands at NIS 143 billion, more than double the pre-October 2023 figure of NIS 65 billion. These numbers represent not a budget for reconstruction and recovery, but a war machine that has formally outgrown the economy sustaining it. What the figures do not show is the structural damage already embedded in the productive base of the Israeli economy, or the costs that have been deferred, displaced, and quietly omitted from the headline totals.

The Unbooked Costs

The Bank of Israel’s own accounting puts total war-related economic damage at approximately NIS 352 billion since October 2023, encompassing direct defense outlays, civilian compensation, property losses, and accumulated interest payments. The government’s preferred framing leans heavily on that figure as a closed balance sheet entry. It is not. The current Iran war, which began on 28 February with the US-Israel joint strike campaign, is running at an estimated NIS 9.4 billion per week in economic damage under full red-alert conditions, with military expenditure alone reaching $6.4 billion in the first 20 days of fighting. Those numbers are not absorbed in the approved budget. An emergency supplemental of NIS 39 billion was added to the 2026 draft on 10 March, but the war has no fixed endpoint, and the supplemental was sized against a conflict that is still escalating.

What makes this structurally serious rather than merely politically inconvenient is the nature of the costs now compounding. Construction across Israel has entered what can be a legal time bomb, with thousands of pending disputes between developers and homebuyers arising from war-related delays to unfinished projects. Palestinian labour, which underpinned large sections of the Israeli construction and agricultural sectors, has been almost entirely withdrawn since October 2023. Israeli agriculture is facing conditions described domestically as existential. The construction industry, already carrying deferred demand and a Bank of Israel-ordered restriction on balloon financing through end-2026, is not positioned to deliver the rebuilding programme the government’s recovery narrative depends upon. The speed of physical reconstruction will directly constrain the pace of economic normalisation, and current conditions suggest that pace will be slower, more expensive, and legally contentious in ways the budget does not price.

The Business Mortality Rate

The erosion of Israel’s small and medium enterprise base is one of the most under-examined dimensions of this war’s economic legacy. By mid-2024, approximately 46,000 businesses had closed since the start of the Gaza campaign, with projections suggesting the figure would reach 60,000 by year-end. By mid-2025, before the Iran war began, the estimated cumulative closure total stood at 80,000, with 77% of those being businesses employing fewer than 5 people. In the first 12-day Iran confrontation in June 2025, more than one-third of all Israeli businesses reported a revenue decline exceeding 50%. The restaurant and food service sector recorded 65% of businesses experiencing severe revenue loss in that single month. The current Iran war is of indefinite duration.

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The staggering price tag on American weapons and ammunition is not merely a product of advanced engineering or bureaucratic bloat. It is a deliberate feature of a system that functions as both economic stimulus and geopolitical control mechanism. This is military Keynesianism in action: using permanent, high-cost arms spending and exports to prop up the US industrial base, recycle dollars back into the domestic economy, and lock allies into dependency. The same playbook that drained Ukraine is now being applied to Saudi Arabia and the broader Gulf - heightening insecurity so that premiums keep flowing to Washington.

The Mechanics of the System

US military hardware is engineered for technological supremacy, extreme reliability, and global projection. That comes with premium pricing: precision-guided munitions, exhaustive testing, layered bureaucracy, and cost-plus contracts that reward spending rather than efficiency. But the deeper logic is protectionist. High prices, combined with strict export controls (ITAR), create a currency and capability barrier. Allies and rivals alike cannot easily replicate or mass-produce what the US sells. The result? The United States extracts rents while preserving its edge. These premiums are channelled back into the American military-industrial complex - jobs, R&D spillovers, and political power in key districts - artificially inflating the size of the US economy and budget.

This is classic military Keynesianism. Defence outlays act as fiscal stimulus without the political baggage of civilian programs. They sustain concentrated benefits for contractors while the costs are diffuse. Cutting the redundant overhead (audits, middlemen, gold-plated specs) would shrink the US military footprint, the contractor lobby, and even headline GDP figures. Washington has no interest in that. Instead, it overcharges everyone else.

The Ukraine Precedent

Look at what happened in Ukraine. Kyiv was forced into a meat grinder of expensive US precision munitions and systems that burned through budgets at unsustainable rates. When the bills became impossible, Ukraine had no choice but to innovate: cheap domestic drones, low-cost artillery shells, and asymmetric tactics that bypassed the premium-price trap. Europe, meanwhile, was pushed deeper into dependency - buying more American LNG and weapons while its own energy and defence independence dreams faded. The conflict was framed as a war against Russia, but the economic winners were clear: US energy exports surged and arms sales boomed. The insecurity created by the high-cost model was the feature, not the bug.

Now It’s Saudi Arabia’s Turn

The same dynamic is unfolding in the Gulf right now.

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Libya’s $4 billion arms deal with Pakistan is stalling for the same reasons the Sudan deal collapsed. Saudi does not trust Haftar. British-made components in the JF-17 fighter jet trigger export controls that Islamabad cannot override. China’s reluctance to supply advanced systems to embargoed states adds another layer of obstruction. Pakistan’s own industrial pipeline is congested, with confirmed orders for Azerbaijan and active negotiations with Bangladesh, Indonesia, and Saudi. The deal, signed in December 2025 in Benghazi and celebrated as one of Pakistan’s largest-ever defence exports, was always more ambitious than deliverable. But the delay matters less for what it says about Pakistan than for what it reveals about Libya. The country is running 2 competing strategies for survival, and the war with Iran will determine which one prevails.

In January 2026, one month before the first US and Israeli missiles struck Tehran, the western government in Tripoli signed over $20 billion in oil development agreements with TotalEnergies and ConocoPhillips at the Libya Energy and Economic Summit. A senior adviser to the US president attended. Chevron signed an MOU for its return to Libya. A separate deal was concluded with Egypt. The projected revenues over the 25-year life of the TotalEnergies-ConocoPhillips agreement exceed $376 billion. The additional production capacity targeted is 850,000 barrels per day. This was transactional statecraft in its purest form. Tripoli wagered that the return of the current US administration had fundamentally altered the terms of engagement in the region, that economic outcomes now mattered more than democratic credentials, and that anchoring Libya’s oil future to Western capital would buy the political legitimacy that elections had failed to deliver. That wager now sits inside a war.

Libya produces approximately 1.4 million barrels of oil per day and holds Africa’s largest proven reserves at 48 billion barrels. It is exempt from OPEC+ quotas because of its political status. Oil and gas account for 95% of government revenue and exports. In 2025, total revenue reached 136.9 billion Libyan dinars, roughly $21.7 billion, of which 99.6 billion came directly from oil sales and 17.2 billion from royalties. The National Oil Corporation has set a target of 2 million barrels per day by 2028, with 1.6 million targeted for 2026 or 2027 through the Strategic Programs Office. In Libya’s first licensing round since the fall of the old regime, 37 companies out of 44 applicants pre-qualified to bid on 22 offshore and onshore blocks. Among them are some of the West’s largest energy firms alongside QatarEnergy, Turkey’s TPAO, and several Chinese operators.

The Iran war has transformed Libya’s energy position overnight. With the Strait of Hormuz effectively closed, global oil markets short by at least 10 million barrels per day as of mid-March, Brent above $100, and QatarEnergy declaring force majeure on LNG contracts, every barrel produced outside the Gulf gains a strategic premium. Libya sits on the Mediterranean, with direct pipeline and tanker access to Europe. Its crude is light and sweet, matching European refinery configurations. Its proximity to Italy, its largest buyer, means shipping costs are a fraction of what long-haul alternatives require. While the Gulf burns, Libya pumps. The question is who benefits.

Two bets, one war

Tripoli’s $20 billion deal and Benghazi’s $4 billion deal are not complementary strategies. They are competing bets on which version of the post-war order will hold. The west has anchored itself to US and French capital, to production-sharing contracts that carry weight in international arbitration, and to the logic that whoever can deliver barrels to Europe under legal certainty will hold the stronger hand when the war ends. The east has anchored itself to Saudi, Pakistan, the UAE, and Russia, to military partnerships that function as proxies for sovereignty, and to the logic that whoever controls the physical infrastructure where oil is produced holds the real power regardless of what Tripoli’s central bank says on paper.

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The $1.5 billion Pakistan-Sudan military supplies deal, which was nearing completion in early 2026 and included Karakoram-8 light attack aircraft, over 200 drones, air defense systems, and possibly JF-17 fighters to bolster Sudan’s Armed Forces against the UAE-backed Rapid Support Forces, has been suspended after Saudi withdrew its crucial facilitation and funding support due to disagreements.

The Iran war has now entered its 4th week with no credible path to resolution. The war is no longer a Middle Eastern story only. It is a global economic event in which 2 states that barely register in media coverage of the conflict, Pakistan and Sudan, are being reshaped by it in ways that will outlast any ceasefire.

Pakistan’s recent attempt to broker talks with Iran, reportedly involving senior US officials meeting Iranian counterparts in Islamabad this week, is not an act of diplomatic generosity. It is an act of economic survival. The same is true of Sudan’s accelerating entanglement with Islamist networks that Washington has now designated as terrorist. Both countries are being compressed by forces they did not create and cannot control. The Iran war is the catalyst, but the underlying vulnerabilities are structural, and in both cases, the longer the war continues, the more trapped each regime becomes.

Pakistan and the economics of neutrality

Pakistan imports more than 80% of its oil. Between July 2025 and February 2026, its oil import bill reached $10.71 billion. The closure of the Strait of Hormuz, through which roughly 20% of global oil and a significant share of LNG transits, has cut Pakistan off from its primary energy supply chain. QatarEnergy has declared force majeure on its contracts. Pakistan relies heavily on Qatari LNG. Fuel prices have jumped 20% in a single week, with petrol at $1.15 per litre and diesel at $1.20, the largest increase in the country’s history.

The government responded with emergency austerity measures on 9 March. A 4-day working week for federal and provincial employees. 50% of government staff working from home on rotation. A 2-week closure of educational institutions. Restrictions on non-essential energy use. The Pakistan Navy launched Operation Muhafiz-ul-Bahr to escort merchant vessels through contested shipping lanes. These are not precautionary measures. They are crisis management for a state with approximately 20 days of oil reserves and foreign exchange reserves of roughly $16 billion only.

The energy shock is only one strain. Gulf economies, which account for more than half of Pakistan’s remittance inflows, are themselves under strain. Saudi has intercepted hundreds of Iranian ballistic missiles and drones since 28 February. The UAE has intercepted over 350 ballistic missiles, 15 cruise missiles, and nearly 1,800 drones. Economic activity across the Gulf is contracting. Remittances to Pakistan, a structural lifeline worth tens of billions annually, are at risk of decline precisely when the country needs them most. Exports, already down nearly 8% during the July-February period, face further deterioration as global demand weakens and freight rates spike. The current account deficit is widening. The trajectory bears an uncomfortable resemblance to the 2022 crisis that forced Pakistan into its 24th IMF programme, worth $7 billion.

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Three weeks into the effective closure of the Strait of Hormuz, global urea prices have surged by more than 30%, nearly 1 million metric tonnes of fertiliser cargo sit stranded in the Persian Gulf, and major producers across the region have declared force majeure on deliveries to Asia, South America, and Africa. The crisis that will define the rest of 2026 is not the one on every screen. It is not the oil shock, though Brent crude has broken $105 a barrel. It is a fertiliser shock, arriving at the precise moment that farmers across the Northern Hemisphere are entering spring planting season, the narrow window that determines what the world eats in September. The chain runs from Hormuz to ammonia to urea to the planting calendar to the autumn harvest to the grocery shelf. It is long, lagged, and almost entirely absent from mainstream coverage. By the time prices arrive at the supermarket, the cause will have been forgotten. This article traces that chain.

The Gulf accounts for approximately 43% of the world’s seaborne urea exports, 44% of global sulphur trade, and more than a quarter of internationally traded ammonia. These are not marginal shares. They represent structural dependence. Urea is the most widely used solid fertiliser on earth, and its production begins with natural gas, which is converted into ammonia through the Haber-Bosch process and then into the nitrogen compounds that sustain roughly half of global agricultural output. The entire value chain runs through one waterway. When that waterway shuts, the disruption does not merely delay shipments. It breaks the production cycle itself.

How the Strait closed without a blockade

Iran did not mine the Strait of Hormuz. It issued radio warnings and launched drones at a handful of vessels. Within 24 hours of the first IRGC threats on 2 March, vessel traffic collapsed by over 80%. Just 7 ships crossed that day against a daily average of 79. More than 150 tankers are anchored outside the strait, fully loaded, going nowhere. No LNG carriers transited at all. The waterway is 21 miles wide, legally open to international navigation, and physically unobstructed. It is commercially dead.

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On 15 March 2026, Muscat Clearing and Depository launched a phased SWIFT integration designed to bring Oman’s capital markets into the global financial messaging grid. Phase one goes live by Q2 2026. Full automation follows by year-end. On any normal day, this would be a routine infrastructure upgrade for a mid-tier Gulf economy still pushing toward MSCI emerging-market status. But this is not a normal day. It is the seventeenth day of a war that has closed the Strait of Hormuz, set fire to Jebel Ali port, grounded Dubai International Airport, and forced the world’s largest container shipping lines to declare “End of Voyage” on all cargo bound for the Arabian Gulf. In this context, the SWIFT rollout is not administrative. It is structural. Oman is not modernising in peacetime. It is wiring itself into the financial plumbing of a region whose previous hub is burning.

The Architecture of Collapse

The UAE’s economic model was always a function of circulation. Capital, cargo, passengers, data. Everything moved through Dubai and Abu Dhabi because the systems worked, the insurance was cheap, the airspace was open, and the brand said safety. That is over now. Iran has fired more than 1,800 missiles and drones at the UAE since 28 February. 6 people are dead. 141 are injured. The Burj Al Arab caught fire from interception debris. Dubai International Airport, the world’s busiest for international traffic, has been hit multiple times and continues to operate under rolling disruptions. A fuel tank near the runway was struck on 16 March. ADNOC’s Ruwais refinery, producing 922,000 barrels per day, was forced offline by a drone strike. Jebel Ali port, which handles an average of $530 million per day in non-oil trade, has taken debris damage and been subject to Iranian evacuation warnings. Khalifa Port, with a 65% transshipment ratio, faces the same structural exposure. The Dubai Financial Market fell 4.7% on its first day of trading after a rare two-day shutdown and lost 9% over its first week. Authorities cut the daily trading limit from 10% to 5% to stem capital flight. Foreign investors are repricing the Emirates from safe haven to conflict zone. Dubai generates $30 billion a year from tourism alone. That revenue stream is now under direct kinetic threat. The model that made the UAE indispensable to global trade relied on an assumption of untouchability. That assumption is finished.

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Egypt is not being bombed. No Iranian drones have struck the Nile Delta. No cruise missiles have hit the Suez Canal zone. Yet two weeks into the US-Israeli war on Iran, the Egyptian economy is buckling under the weight of a conflict it did not start, did not join, and cannot escape. The pound has lost roughly 11% in a single month, sliding from around 47 to the dollar to beyond 52. The stock exchange plunged 7.5% at the open on its first trading day after Operation Epic Fury began on 28 February, with trading halted on 47 companies after losses breached automatic circuit-breaker thresholds and roughly 100 billion pounds wiped from total market capitalisation. Between $5 billion and $8 billion in foreign portfolio investment has fled the country. A planned $2 billion sovereign bond issuance has been shelved. On 10 March, in the middle of Ramadan, Cairo broke a public pledge to freeze fuel prices for a year and hiked petrol, diesel and cooking gas by up to 30%. This is the sixth fuel increase in two years. Since March 2024, average petrol and diesel prices have risen approximately 80%. Egypt is experiencing the full economic violence of a regional war without having fired a single shot.

The damage is not incidental. It is structural. Egypt runs on three external lifelines and all three are now under simultaneous stress. Israeli gas from the Tamar and Leviathan fields, which supplied approximately 1.1 billion cubic feet per day, was cut off the moment the war began under a force majeure clause. Israel briefly resumed some flows mid-week, only to halt them again without prior notice as military operations intensified. Egypt’s domestic gas production sits at roughly 4 billion cubic feet per day against demand now approaching 7 billion as warmer months push up electricity consumption. Qatar, which had signed an LNG supply deal with Cairo in January covering 24 cargoes, declared force majeure of its own following Iranian strikes on Ras Laffan and the effective closure of the Strait of Hormuz. A separate $4 billion deal signed in November for 80 US LNG cargoes cannot fill the gap alone. The government is scrambling to secure spot cargoes at vastly higher prices, with four regasification vessels now leased. The petroleum import bill, which stood at $12.5 billion in 2024, is projected to reach $20 billion this year. The budget assumed oil at $75 per barrel. Brent briefly hit $119.50 on 9 March. The fiscal arithmetic has collapsed.

The Suez Canal, Egypt’s other critical foreign-currency artery, is being hit for the third time in under three years. After Houthi attacks on Red Sea shipping in 2024 caused transit revenues to crash from $10.2 billion in 2023 to roughly $4 billion, a partial recovery had been underway. Projections for 2026 pointed to revenues approaching $10 billion. That is now finished. CMA CGM, Hapag-Lloyd and Maersk have rerouted around the Cape of Good Hope. Ships avoiding the Strait of Hormuz no longer transit the Arabian Sea toward the Red Sea and Suez. Cumulative Suez losses since October 2023 now stand at approximately $10 billion. Exporters are haemorrhaging. Freight and insurance costs per shipment have jumped $2,500 to $3,000, and many companies shipping food and engineering goods to the Gulf - a market worth roughly $9 billion last year - have simply paused operations.

The Hot Money Trap

The third lifeline is the most fragile and the most politically charged. Egypt finances a large share of its deficit through short-term foreign purchases of pound-denominated treasury bills - “hot money” in Cairo’s financial shorthand. Foreign holdings stood at approximately $45.7 billion as of September 2025. This model works when global risk appetite is high and Egyptian yields are attractive. It disintegrates the moment geopolitical volatility spikes. In 2022, when Russia invaded Ukraine, roughly $20 billion exited within weeks, triggering four successive devaluations and inflation that peaked at 38%. The same mechanism is now running. Outflows began before the first strikes, as US carrier deployments signalled imminent escalation. Net foreign outflows from the secondary government debt market totalled $1.12 billion in the week leading up to the attacks. By 8 March, total portfolio divestments since the war started had reached between $5 billion and $8 billion. The pound hit a record low of 52.8 on the offshore market, a single-day drop of 5.3%, the largest since the 2024 devaluation.

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On 14 March 2026, the Israel Defence Forces confirmed it had destroyed the primary research centre of the Iranian Space Agency alongside an air defence production facility in Tehran. The strike was not peripheral. It was a direct hit on the infrastructure Iran has used to build, test and orbit reconnaissance satellites for over a decade. 48 hours earlier, US Central Command had already confirmed that space and cyber capabilities acted as first movers in Operation Epic Fury, layering non-kinetic effects to blind Iranian sensor and communication networks before a single bomb was dropped. This is not a war with a space dimension. This is a war in which space is the dimension that matters most.

The targeting of Iran’s space infrastructure is not incidental to the broader campaign. It is structurally central to what the US and Israel are trying to achieve. The logic is straightforward. Whoever controls orbital surveillance, satellite navigation and space-enabled communications in the Middle East controls the tempo and precision of modern warfare. Israel proved this during the 12-day War of June 2025, when its constellation of Ofek and Dror satellites collected tens of millions of square kilometres of imagery across Iranian territory, generating targets in real time and enabling strike operations from orbit to cockpit without risking a single operative on the ground. Over 12,000 satellite images of Iran were captured during Operation Rising Lion alone. That asymmetry of vision is what Israel is now fighting to preserve and what the US is fighting to entrench.

Orbital Arms Race

The Middle East’s space race did not begin with this war but the war has accelerated it beyond recognition. Israel’s Ofek programme dates to 1988, making it one of only 13 countries with indigenous launch capability. In September 2025, Israel launched Ofek 19, an advanced synthetic aperture radar satellite capable of imaging objects smaller than 50 centimetres in any weather condition, day or night. The Israeli defence establishment has committed to investing billions of shekels over the coming decade to deploy a full satellite constellation offering persistent surveillance of any point in the Middle East. The stated ambition is coverage every 15 minutes, combining large high-resolution platforms with swarms of smaller, cheaper satellites developed by Elbit and Rafael. Israel’s space sector now comprises roughly 90 companies and grew 66% between 2020 and 2023, outpacing its broader tech ecosystem by a factor of three. In July 2025, Israel Aerospace Industries launched the Dror 1 communications satellite. The Israeli space economy is no longer a niche defence project. It is a pillar of national power.

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Two weeks into the bombing of Iran, the framing has already been set. Regime change. Nuclear disarmament. Regional stability. These are the terms offered to the public and they are, at best, a fraction of what is actually happening. The war launched on 28 February 2026 is not principally about replacing the Islamic Republic with something more amenable to Washington. It is about restructuring the political economy of the entire Middle East to deepen its financial subordination to the US. Every dimension of the conflict, from the Strait of Hormuz closure to the trillion-dollar investment pledges extracted from the Gulf, follows one logic. Washington is engineering dependencies that funnel capital, energy revenues, and strategic leverage back to the American economy at the precise moment that economy needs external inflows most desperately. Iran is the catalyst. The real targets are everybody else.

The pattern is not new. The war in Ukraine severed European energy dependence on Russia, collapsed European industrial competitiveness, and redirected both capital and corporate migration toward the US. American LNG exports to Europe surged. European defence budgets ballooned, with Germany alone now spending over $100 billion per year on arms, much of it procured from or in partnership with US firms. In January 2026, the US seized Venezuela, captured its president, and within days announced that American oil companies would invest billions to rebuild its shattered infrastructure. 70% of US refinery capacity is optimised for heavy crude of the kind Venezuela produces. The Venezuelan operation was not humanitarian intervention. It was industrial policy conducted through regime change to maintain US dollar and energy hegemony. The Iran war is the same model applied to the Middle East, and it is already producing the same results.

Buying Protection at American Prices

The Gulf states have been purchasing American weapons for decades. What is different now is the scale of dependency being imposed under conditions of live fire. In late January 2026, the US Defence Security Cooperation Agency notified Congress of a potential $9 billion sale of 730 Patriot PAC-3 MSE interceptors to Saudi Arabia. Kuwait received an $800 million Patriot sustainment package. Qatar, which has spent $47.9 billion on US arms since 2010, remains the single largest foreign investor in the American economy. Every interceptor fired at an incoming Iranian missile is another transaction in which American defence contractors profit and Gulf treasuries deplete.

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Qatar’s decision on 7 March 2026 to facilitate alternative overland transit through Saudi Arabia may prove to be one of the most consequential trade moves of the war. At first glance, it looked like a technical customs response to a regional emergency. In reality, it signalled something much larger. It showed that the current war is not simply disrupting commerce across the Gulf and the Levant. It is accelerating a struggle over who will control the next map of regional trade. On 17 February 2026, Mwani Qatar and the Saudi Ports Authority signed a memorandum of understanding in Riyadh to deepen maritime and logistics cooperation, covering port management, direct maritime and land connectivity, logistics services, cross-border transit, joint maritime corridors, regional distribution centres, digital transformation, data governance, and artificial intelligence.

At a moment when war is exposing the fragility of existing Gulf trade routes, Doha and Riyadh are not merely reacting to disruption or improving routine coordination. They are putting in place the institutional, logistical and digital foundations of an alternative trade architecture that strengthens Saudi-Qatari integration and gives material form to a parallel corridor logic running through Gulf land depth rather than the older model centred elsewhere.

The original India Middle East Europe Economic Corridor (IMEC) was launched in September 2023 as a US-backed framework linking India to the Gulf and Europe through maritime links, rail, energy infrastructure and digital cables. But its logic was always political as much as commercial. It was meant to anchor a new regional order in which the UAE and Israel would sit at the centre of east-west connectivity, while Saudi Arabia would eventually be folded into a structure largely designed elsewhere. That design now looks far less durable than its sponsors imagined.

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An Iraqi-Emirati consortium announced a $700 million data cable project linking the UAE to Turkey via Iraq on 16 February, barely a week after Saudi’s stc Group won an $800 million contract for Syria’s SilkLink network. The timing is no accident. This is UAE-Saudi competition playing out through duelling infrastructure bets of nearly identical scale, with each power racing to lock in alternative transit routes and position itself as the region’s indispensable digital hub for grand projects like the IMEC. But what elevates this beyond typical Gulf rivalry is what the UAE is actually building the infrastructure to support, namely a $20 billion AI compute cluster that OpenAI claims will serve half the world’s population.

The competition is real and the cable investments reveal how seriously each side is taking it. Saudi moved first with Syria, leveraging Trump’s May 2025 sanctions lift to secure an 800-kilometre fibre-optic network with Mediterranean access. The UAE’s response through Iraq came within days, committing $700 million to match Saudi’s $800 million bet. That’s Abu Dhabi ensuring it doesn’t cede regional connectivity dominance to Riyadh whilst simultaneously building redundancy for the most ambitious AI infrastructure project outside the US.

In May 2025, OpenAI announced Stargate UAE, the first international deployment of its platform jointly developed with SoftBank, Oracle, and Abu Dhabi’s MGX fund. The facility will span 10 square miles, consume 5 gigawatts of power, and will be physically larger than Monaco. The initial 1-gigawatt AI cluster is set to begin operations in 2026, with construction photographs from October 2025 showing work well advanced. The UAE committed between $16 billion to $20 billion total, with $8 billion to $10 billion matched between UAE and US deployments.

This transforms the UAE-Saudi digital rivalry from regional posturing into genuine competition over who becomes the Middle East’s AI gateway with global implications. The UAE has locked in strategic partnerships with the dominant players through Microsoft’s $1.5 billion investment in G42 announced in April 2024, OpenAI’s selection of Abu Dhabi as its first international Stargate location, and MGX’s $100 billion target for AI infrastructure investments launched in March 2024. Riyadh is deploying capital at impressive scale through separate initiatives, but Abu Dhabi has secured the ecosystem that positions it to host compute infrastructure at a scale that could exceed Saudi’s entire national data centre capacity.

Red Sea Disruption Forces Alternative Routes

The Red Sea factor makes the competition urgent rather than merely strategic. Multiple submarine cables were severed in the Red Sea near Jeddah on 6 September 2025, causing widespread internet disruptions across Asia and the Middle East. The SMW4, IMEWE, FALCON GCX, and Europe India Gateway cables were all affected. This followed earlier February 2024 damage when a Houthi-struck vessel’s anchor destroyed three major cables. Microsoft Azure users faced significant latency spikes, and repairs take months because cable ships cannot safely operate in Houthi-controlled waters.

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Parliament in Beirut is set to debate legislation that Prime Minister Nawaf Salam’s government insists will save Lebanon’s shattered financial sector. The banking bill promises to protect small depositors and unlock billions in reconstruction funds. Yet beneath the technical language of equity depletion and central bank recapitalisation lies a far more consequential struggle over Lebanon’s future alignment in a rapidly reshaping Middle East.

The legislation cannot be understood as a standalone economic measure. It represents the financial architecture through which external powers intend to bind Lebanon into Trump’s Board of Peace, the US-sponsored India-Middle East-Europe Economic Corridor and Abraham Market frameworks. Gulf states and Western governments have made their position explicit. Reconstruction aid flows only after IMF-mandated reforms pass through parliament. Lebanon’s economic sovereignty is being traded for the promise of recovery while its future is tied to external interests.

The Fayyad Playbook in Beirut

President Joseph Aoun’s election in January 2025 ended two years of political paralysis and introduced a governing approach familiar to observers of Palestinian Authority dynamics under Salam Fayyad. Between 2007 and 2013, Fayyad implemented economic governance models that Western donors praised, whilst the Palestinian Authority became perceived by many as functioning primarily to maintain Israeli and US security interests.

Nawaf Salam appears cast in a similar role for Lebanon. Both are technocrats elevated by Gulf and Western backing to implement reforms that weaken resistance movements whilst integrating their territories into US regional architecture. Aoun’s inaugural commitments to dismantle criminal networks, reform banking with transparency, and engage diaspora voters through new electoral laws align closely with Western and Gulf priorities. These measures specifically target Hezbollah’s societal standing by making reconstruction conditional on political concessions that undermine the movement’s support base.

Finance Minister Yassine Jaber frames the banking bill as protecting depositors, with guarantees up to $100,000 repaid within four years. The broader structure tells a different story. IMF requirements demand bank equity depletion before deposit deductions apply, forcing shareholders to absorb losses first. The Association of Banks in Lebanon warned the draft amounts to sector liquidation. From a strategic perspective, dismantling the traditional banking elite removes one pillar of the old order that sustained Hezbollah’s financial networks and political influence.

Integration Through Crisis

Lebanon’s economic collapse since 2019 has produced estimated losses of $70 billion. The currency has shed over 90% of its value. Poverty rates have soared whilst the state struggles to provide electricity and water. Yet this crisis has become a governance tool rather than merely a policy failure. Prolonged economic weakness keeps Lebanon dependent on external actors who leverage reconstruction funds for political realignment.

The banking bill sits at the centre of this strategy. Large depositors will receive central bank securities maturing over 10 to 20 years, backed by asset liquidation. Commercial banks must cover portions of these payments, threatening their capital base. A clause requiring state recapitalisation of the central bank if needed could impose debt burdens that trigger another default. The finance ministry must agree with the central bank on contested state debts, with experts warning that high figures risk balancing central bank books at the expense of government spending and broader economic stability.

This creates what Minister Jaber acknowledged as an impossible choice. If demands from the central bank and commercial lenders are met, parliament kills the IMF deal. If IMF requirements are fully implemented, the banking sector collapses entirely. The Catch-22 serves external interests by maintaining Lebanon in a state of controlled crisis where reconstruction funds remain perpetually conditional on further concessions.

Regional Architecture and Resistance

President Aoun’s foreign policy commitments reinforce the geopolitical reading of economic reform. He pledged to strengthen integration with Arab countries through strategic partnerships, student exchanges, tourism and investment. Whilst rhetorically opening Lebanon to both East and West, the practical focus remains on Gulf countries and Western partners. BRICS engagement appears sidelined in favour of US security guarantees and integration into the Abraham Market launched by President Biden in September 2022.

The IMEC corridor requires stable, compliant partners. Lebanon’s ongoing crisis makes it an unreliable link in the chain connecting India to Europe through Arab states and Israel. Hamas’s strategic aim has been to slow Israel’s integration into regional markets whilst the Palestinian issue remains unresolved. This succeeded in early stages of the conflict but latter phases have seen accelerated steps toward normalisation. Lebanon’s repositioning within this architecture cannot proceed whilst economic crisis persists, making the banking bill the mechanism through which geopolitical alignment is enforced.

Aoun addressed extensive damage in Southern Lebanon and the Bekaa Valley, attributing it to Israeli aggression whilst simultaneously committing to reforms demanded by the powers that enabled that aggression. He vowed to exercise state authority over all territories, including Palestinian refugee camps, and pledged to disarm these camps. His administration described relations with Syria as a historic opportunity for dialogue on sovereignty and border control. These positions align precisely with US and Israeli strategic objectives for the region.

Sovereignty or Subordination

Parliament will debate the bill formally in coming weeks, with amendments expected from multiple directions. Some MPs will push changes satisfying IMF requirements whilst others seek alignment with the central bank and commercial lenders. The outcome determines not just depositor compensation and bank survival but Lebanon’s position in the emerging Middle East order.

A preliminary IMF deal in 2022 stalled due to infighting and pushback from economic and political elites. The current government faces identical obstacles, with Lebanese Forces ministers opposing the law in cabinet. Banks and politicians accuse the state of dodging responsibility for crisis losses. Yet previous failures to pass reforms serve external interests by prolonging Lebanon’s weakened state and deepening dependence.

Mock wanted posters of bank executives still adorn walls outside the Central Bank, grim reminders of public anger after six years of collapse. Yet the banking bill debate proceeds as if these are technical matters rather than existential questions about who controls Lebanon’s future. Whether Lebanon emerges as a sovereign partner in regional development or a subordinate node in US-led architecture will be determined by how this legislation reshapes the economic foundations of political power.

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