The Reality of UAE-Saudi Tensions: More Aligned Than Not, For Now

Risk Outlook: July 23, 2026

Jul 23, 2026

Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Anni Coonan examines UAE-Saudi tensions.

The Reality of UAE-Saudi Tensions: More Aligned Than Not, For Now

By Anni Coonan

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Tensions between two of the Arab Gulf’s most important power players, Saudi Arabia and the UAE, have increasingly broken containment in recent months, highlighting risks for US strategy and international businesses. Ties reached an open crisis in December, when Emirati-backed secessionists openly fought the Saudi-backed government in Yemen, but tensions were ultimately calmed. Risks spilled into the business sphere over the past month, with cross-border payments reportedly blocked and overland shipments into Saudi Arabia delayed. But is it a rift, a rupture, or simply tensions between mostly aligned states vying for the same economic and diplomatic resources? Riyadh and Abu Dhabi are far from an open schism, and remain aligned on significant economic and foreign policy objectives – especially as the pressures of the Iran war have both capitals projecting unity in the name of economic stability. Growing tensions reveal diverging strategic visions for the region and the direct competition built into both states’ economic diversification ambitions. A more open rift in the future is possible and could bring with it significant implications for US strategy, global energy markets, and multinational businesses (for whom both countries are major markets and sources of capital).

In today’s full analysis:

New Evidence of Tensions
Why are Saudi and the UAE at Odds?
Implications for International Businesses and US Gulf Strategy

Read the Full Report Here

Global

The global economy braces for the next round of President Trump tariffs. The temporary 10% global tariff is set to expire tomorrow. The administration has been preparing new tariffs, reportedly targeting 60 countries over forced labor concerns, with proposed levy rates ranging from 10% to 12.5%. These would replace the tariffs struck down by the US Supreme Court in February. The administration remains committed to its global tariff policy to support reindustrialization of the US economy, protect American workers and shrink the trade deficit.

Introduction of additional tariffs at this time would create new risks to the US and global economy. The war with Iran, with the shipment of oil, gas and refined products disrupted through the Strait of Hormuz and Bab el-Mandab, is driving up energy and transportation costs. Tariffs risk adding to the price of consumer goods for American families. If the tariffs are on par with existing 10% tariffs, the impact could be minimal. However, the 50% tariffs unveiled on Monday against Canadian goods and the 25% levy on Brazilian imports are making markets nervous, with concerns that President Trump is determined to renew his trade war, regardless of short- and medium-term impacts.

Read More: New York Times [paywall], Financial Times [paywall], Tax Foundation

Europe

European capitals agreed on a large but watered-down sanctions package on Russia. Yesterday was supposed to be the final day for Ambassadors to reach a conclusion on the 21st sanctions package, but internal disagreement pushed negotiations over. Greece sought to prevent a maritime services ban for Russian gas to protect its domestic shipping industry, which carries a fifth of the world’s cargo capacity and has earned an estimated $3.8 billion since the beginning of the G7 price cap regime in December 2022. In the end, Greece agreed to a minimum one-year exemption for EU shipping firms to transship Russian gas to non-EU buyers, such as Arctic LNG. The sanctions package also keeps the seaborne crude price cap at $44.10 per barrel for 12 months, ending the benchmark regime where the cap moves with market prices (which are currently inflated due to the Iran war). The package targets 94 banks and cryptocurrency operators, 218 individuals, and 40 vessels in Russia’s shadow fleet.

The diplomatic episode underscores EU resolve to continue pressuring Russia. Now that Viktor Orban no longer plays spoiler, EU countries must stake out their positions—and divisions—more openly. In this case, Greece felt compelled to prevent a policy it believed would route its shipping industry to other countries, ironically undermining sanctions enforcement. But overreading this friction could cloud the bigger picture. The EU’s direction of travel remains consistent in constraining Russia’s war machine, and work on the 22nd sanctions package will accelerate after the summer break.

Read More: Deutsche Welle, Financial Times [paywall], Politico

Middle East

The US and Saudi Arabia have reached a landmark nuclear deal, providing Riyadh with a civilian nuclear program and potentially the right to enrich domestically. The final deal follows a preliminary agreement signed last year, and years of Saudi efforts to secure a technology transfer agreement with the US. It will involve US companies establishing nuclear reactors and, following a feasibility study, a black-box enrichment site within the Kingdom. Saudi Arabia wants to boost non-oil investment as well as rely on renewable energy at home to free up more oil for export.

Critics say the deal could fuel a nuclear arms race in the Middle East, while proponents see it as a win for nonproliferation. The deal lacks either an Additional Protocol, which provides for the highest level of IAEA monitoring, or a “Gold Standard” agreement, which prohibits uranium enrichment in-country or reprocessing spent fuel. While any domestic enrichment would occur in a black-box facility that would prevent knowledge transfer to Saudi scientists, observers worry about a knowledge leak – especially because Saudi Arabia has previously said that it would pursue a nuclear weapon if Iran obtained one.

The signing of the deal de-links a nuclear agreement from Saudi normalization with Israel. The Biden administration was reportedly in the midst of negotiating a civil nuclear tech for normalization deal with Saudi Arabia through 2024. Going ahead with the deal now – apparently mostly to appease Riyadh amid anxieties over US commitments during the Iran war – sacrifices key leverage that the US had previously hoped to use to get the Kingdom in the Abraham Accords, a foreign policy Holy Grail for successive administrations.

Read More: Wall Street Journal [paywall], Politico, Atlantic Council

Asia-Pacific

The US State Department on Wednesday highlighted more than $2.5 billion in investments and initiatives across the Asia-Pacific, with a particular focus on Southeast Asia, bringing together commitments announced in recent months. The package spans advanced technology, energy, infrastructure, transnational crime, law enforcement, security cooperation and global health. Among the new initiatives is AI SPARK, part of the US-led AI and semiconductor secure supply chain initiative, which will provide financial and technical assistance to Southeast Asian governments seeking to deploy US artificial intelligence technologies in the public sector. Several of the announcements also reinforce US-Philippine cooperation, including expanding the Philippine Coast Guard Pier, which comes shortly after tensions flared once again between Beijing and Manila in the South China Sea.

The announcement comes as US Secretary of State Marco Rubio visits Manila for the Association of Southeast Asian Nations (ASEAN) Foreign Ministers’ Meeting and the East Asia Summit, where he has stressed Washington’s “100%” commitment to the region and described ASEAN as the “primary mechanism” for US engagement. The messaging works to address regional concerns over the fallout from the Iran conflict, particularly energy security, and concerns over the Trump administration’s prioritization of Asia-Pacific as it turns attention to the Western Hemisphere and other regions. Although Rubio met Chinese Foreign Minister Wang Yi ahead of the anticipated Trump-Xi meeting while in Manila, he has repeatedly reassured Asian partners that managing competition with Beijing will not come at the expense of US alliances. Together, the investment package and Rubio’s messaging underscore Washington’s effort to demonstrate that economic and technological engagement remains central to its Asia-Pacific strategy despite competing global priorities.

Read More: US Department of State, Reuters [paywall], Reuters [paywall], Nikkei Asia [paywall], Al Jazeera

Americas

Nicaraguan President Daniel Ortega declared on Sunday that the country would no longer hold elections. He stated at a rally marking the 47th anniversary of the Sandinista revolution that “there will never be elections here again.” Ortega argued that elections had been used by his opponents as a mechanism to “seize power” and reiterated accusations that government critics were acting on behalf of foreign interests. His comments cast doubt on the future of Nicaragua’s planned 2027 presidential vote and represented the clearest indication yet that the Ortega-Murillo administration intends to abandon even the formal electoral processes that have been widely criticized by international observers in recent years.

The remarks drew a swift condemnation from US Secretary of State Marco Rubio. In a July 21 press statement, he said that Ortega’s comments lay bare the authoritarian nature of the Ortega-Murillo government and demonstrate that the country’s leadership has “abandoned even the pretense of popular consent.” Rubio called on the international community to increase pressure on Managua, arguing that Nicaragua cannot expect business as usual with other countries while undermining democratic principles. The statement signals that Washington may seek to rally regional and international partners behind a coordinated response to Ortega’s latest move and further isolate the Nicaraguan government diplomatically.

Read More: New York Times [paywall], State Department, Reuters [paywall]

Africa

The RSF appears to be positioning for another offensive against El Obeid, a battle that could prove pivotal in determining the trajectory of Sudan’s war. The capital of North Kordofan, El Obeid occupies a critical strategic position linking central Sudan with Darfur and lies roughly six hours by road from Khartoum. The Rapid Support Forces (RSF) sought to seize the city in 2025 but were ultimately repelled by the Sudanese Armed Forces (SAF). In recent weeks, drone attacks and clashes around El Obeid have intensified, raising fears that a renewed assault could trigger another major humanitarian crisis.

The shift of the conflict’s center of gravity toward Kordofan comes as diplomatic efforts remain stalled. Recent meetings involving political actors aligned with both the RSF and SAF have failed to produce meaningful progress toward a negotiated settlement. Meanwhile, the SAF reportedly rejected a peace proposal from the US, insisting that any agreement must first require the RSF to withdraw from all territory it currently controls. With negotiations deadlocked and fighting escalating, El Obeid has reemerged as a key military objective and a test of whether either side can achieve a decisive advantage on the battlefield.

Read More: Anadolu Agency, Financial Times [paywall], Reuters [paywall]

Disruptive Technology

Treasury Secretary Scott Bessent suggested yesterday that the US could sanction Chinese AI developers for “IP theft,” referring to industrial-scale distillation. Chinese developers are accused of playing catch-up through distillation, where AI models train on millions of outputs of more advanced frontier models through thousands of fraudulent accounts. Sanctions could take many forms. Bessent’s comments follow reports yesterday that the US is considering placing licensing requirements for Chinese AI systems, and China is considering its own restrictions to keep open weights of leading models (i.e., the published parameters the models train on) away from foreign competitors. The US could also pursue more disruptive measures by targeting individuals allegedly perpetrating IP theft or blocking sanctions on companies.

Sanctions could dramatically escalate a tense geoeconomic truce between the US and China. US-China dialogues to renew a managed geoeconomic relationship are scheduled for September. The US does not wish to reignite China’s export controls on rare earth inputs, while China does not want US tariffs to cut off vital export markets. If the US sought to apply blocking sanctions against Chinese AI developers, China would likely scramble to either insulate them in separate financing systems, or even directly challenge the sanctions by criminalizing domestic compliance, forcing the Chinese financial system to ignore potential ramifications in a large-scale challenge to the US’ financial chokepoints. The second scenario nearly occurred when China directed its domestic banks not to comply with US sanctions against refineries accused of smuggling Iranian oil, but China quietly disarmed this stand-off.

Read More: CNBC, TechCrunch

Energy

Germany has approved nuclear energy cooperation with Russian state-backed firms. The German state Lower Saxony, following guidance from the German government, approved a request by the French firm Framatome to license production of nuclear fuel elements in a joint venture with Russian firms TVEL/Rosatom. The production will occur at a plant owned by a Framatome subsidiary in Germany. A spokesperson for the German government said that while Berlin was skeptical of cooperation with Russia, the deal between Framatome and the Russian companies was in accordance with Germany’s nuclear laws. The license includes security provisions due to the sensitive nature of the cooperation, such as an entry ban on Russian employees and external security audits.

The EU has not sanctioned Russia’s nuclear industry even as it has dialed up sanctions on Russian oil and gas. Russia is a leading global actor in nuclear energy projects and is involved in the construction projects for nuclear power plants across the globe. While Russia’s oil and gas revenues far outstrip its nuclear energy business, nuclear cooperation remains an area where Moscow can leverage its technical expertise and industry to build relationships with other states. However, the EU has struggled to sanction Russia’s nuclear sector due to a lack of consensus between the members of the EU.

Read More: Reuters [paywall], ZDFHeute [in German], Deutsche Welle

Transnational Crime and Corruption

As part of his trip to the Philippines for the ASEAN Summit, Marco Rubio met with Cambodian Foreign Minister Prak Sokhonn to discuss the issue of scam centers. According to a US Department of State press release, Rubio and Sokhonn “reaffirmed a shared commitment” to law enforcement cooperation on Cambodian scam centers. FBI Director Kash Patel also held direct discussions with Cambodian Prime Minister Hun Manet on Wednesday after attending a Thailand-hosted international law enforcement summit on combating scam centers.

The US is seeking international partnerships to supplement its Scam Center Strike Force. The force was created in November 2025 with representatives from the Department of Justice, the FBI, the Secret Service, the Department of State, the Department of the Treasury and the Department of Commerce.