Before the outbreak of the Israel-Gaza war on October 7, much of the Middle East was moving in the direction of de-escalation and normalisation. Saudi Arabia and Iran signed their Chinese-brokered normalisation pact in March, Syria was readmitted into the Arab League, Turkey’s President Recep Tayyip Erdogan worked to improve relations with the UAE, Saudi Arabia and Egypt, and the US was encouraging normalisation between Saudi Arabia and Israel. In addition, Washington was helping to move forward several regional co-operation platforms, such as the I2U2 grouping (including India, Israel, the UAE and US), the India-Middle East-Europe Economic Corridor project and the Negev Forum. To be sure, there were countervailing forces. The civil wars in Libya, Syria and Yemen continued to simmer, unresolved. More worryingly, a new civil war erupted in Sudan. And difficult economic conditions in energy-importing countries exacerbated by high debt burdens, high interest rates, high inflation and high food prices had a major impact on Egypt, Jordan, Tunisia and others. Lebanon had already tipped into full economic collapse, and its political and economic paralysis continued through 2023. In Israel, the most right-wing government in that country’s history assumed power as the year commenced. The Hamas attack of October 7, and the massive and continuing Israeli war on Gaza that it unleashed, has pitched the region in a dangerous and much more escalatory direction. The attack took the highest toll in Israel’s modern history, and the ongoing retaliation in Gaza has resulted in the worst loss of life and displacement of Palestinians since the Nakba of 1948. Public opinion throughout the region has rapidly polarised, with Arab and Muslim opinion championing sympathy for Palestinians and hostility toward Israel’s actions, and Israeli public opinion moving further to the right. The conflict has also escalated beyond Palestine and Israel. The US barely managed to dissuade Israel from a large-scale attack on Iran-backed Hezbollah in Lebanon early in the conflict, and exchange of fire across the Lebanon-Israel border has been the highest since 2006. The risk of a major Israel-Hezbollah war in 2024 remains high. Other Iranian allies or proxies in the region have also stepped up their engagement. Pro-Iranian militias in Iraq and Syria have mounted over 100 attacks on American troops, and the Americans have retaliated in kind. The Houthis have launched attacks on Israel and Red Sea shipping, which have been largely ineffective but have nonetheless disrupted shipping in the Red Sea. The US has hit back at militias in Iraq and Syria, but so far has chosen not to hit back on Yemeni soil. The regional escalation has been significant, but it is important to note that it is also limited in intensity and has remained well short of major conflict. The previous detente between several GCC states and Iran, as well as American deterrent power – symbolised by two US carrier groups moving into the Eastern Mediterranean – have helped keep regional escalation relatively contained, at least so far. So far as well, the peace treaties and Abraham Accords that have tied Israel to several Arab countries have held, although relations are clearly more strained than before, and the prospect of Saudi-Israeli normalisation talks will have to await at least until an ending of the current war. In 2024, much will depend on how that ending takes shape and what will come after it. If the war ends with a renewed Israeli occupation of Gaza and a ramped-up expansion of settlements in the West Bank, the momentum toward further normalisation with Israel could slow and Arab public opinion would solidify against it. At the same time, the US will face headwinds in its regional relations. Iran and its proxies, as well as other extremist groups, will benefit from this polarisation and gain more adherents and influence. On the other hand, if the war is followed by a robust peace effort, led by the US but including key global and regional players, the Middle East could turn in a much more positive direction, leaving radicals and spoilers on the side-lines. Indeed, if war is the continuation of politics by other means, Israel and the US are fighting different wars: Israeli Prime Minister Benjamin Netanyahu’s government is fighting to strengthen Israel’s occupation and the one-state apartheid-like reality; the US is claiming that its end game is a strengthened Palestinian Authority and a revived peace process working toward a two-state solution. It is also important to note that a majority of Americans do not approve of Biden’s handling of this war, and a majority of young Americans between the ages of 18-29 sympathise more with Palestinians than they do with Israel. How these dynamics will impact US-Israel relations in a US election year and beyond is hard to predict. Arab countries have important leverage over what comes after this war: a peace process and hope for the Palestinians, or a consolidation of Israel’s long-term occupation. In previous attempts at peace breakthroughs, in the late 1970s and early 1990s, the Gulf countries did not have the influence they have today, nor were they players in relations with Israel. Today, all that is different. The best hope for the Palestinians is a state of their own. The only realistic pathway toward that is a two state solution. The only way to get there is through tough and successful negotiations. Such a political breakthrough would require bold leadership on all sides. Economically, the Middle East is likely to remain a very uneven domain in 2024. The IMF and World Bank estimate an average Mena growth rate of 3.5 per cent, up from 2 per cent in 2023, but this will belie great income and wealth disparities between the GCC countries at the top, nearby countries like Yemen and Syria at the very bottom and low-income countries like Egypt, Jordan, Lebanon, Tunisia and Morocco struggling to contain poverty and unemployment. If the Israel-Hamas war triggers more serious disruptions in the Red Sea or the Gulf, then even the region’s most prosperous states could be impacted by negative ripple effects throughout the region, and indeed the world economy. Leaders throughout the region should focus on bringing about an urgent end to the Israeli war in Gaza, bringing urgent relief to the suffering people of Gaza and then playing a leading role in launching a robust political and diplomatic process to help transform this worst of wars into an opportunity for change towards peace. In the meantime, they should also endeavour to prevent any major escalation of conflict to other areas, and work with lower-income countries to help their populations weather the socio-economic stresses of current economic conditions.
