Why a ceasefire won't fix Gulf investor sentiment until the threat architecture changes

The US-Iran agreement signed earlier this month did not answer the questions that started the war, and yet markets are reacting like it did. Brent is back near pre-war levels, tankers are loading at Ras Tanura again, and the Gulf's risk premium has quietly drained out of the screens. Analysts watching the money say that gap, not the headline calm, is what will decide whether capital actually comes back.

The working scenario for the next year is uncomfortable but is becoming more and more likely: no political resolution, attacks on the Gulf still on the table, Iran’s ballistic program intact, and Israel’s territorial ambitions essentially unchecked. The question for anyone deploying into Saudi Arabia is whether sentiment and inflows recover anyway over the short and medium term, or if the region is absorbing a long-term re-rating it won’t shake off.

“Markets are acting as if the war is over and oil prices are back to pre-war levels, but this doesn’t [ensure] an end to frictions,” Omar El Shenety, managing partner at Zilla Capital and head of the financial markets unit at the Egyptian Center for Economic Studies, tells EnterpriseAM. The agreement is a good milestone for the region, he adds, but “it doesn’t seem like a confirmed end or resolution to the war and associated turbulence.”

Already we’re seeing signs of fraying. Within days of signing the agreement, an Iranian drone hit a cargo ship in the strait, the US struck some 10 Iranian targets near Hormuz, and Iran fired on US-linked sites in Bahrain and Kuwait. US President Donald Trump was warning hours ago that Iran “will no longer exist” if strikes continue, and Tehran was threatening to walk, before both sides agreed to stop the hostilities (again).

The MoU and the Switzerland talks didn’t close the core questions, including Iran’s enrichment rights, its highly enriched uranium stockpile, the scope of IAEA inspections, and the sanctions timeline. Instead, “they’ve deferred it by 60 days with a more formal wrapper around the uncertainty,” Aseel Al Aranki, research and analysis department manager at River Prime, tells EnterpriseAM.

More telling, the two sides publicly disagree on what they signed. Iran denied committing to inspector access on the same day Washington called it a milestone. Israel, not a party to the agreement, has signaled it intends to keep troops in southern Lebanon indefinitely. The likeliest outcome of the 60-day window is a partial pact, which is a problem. “[An agreement] that kicks the nuclear and ballistics questions further down the road [leaves] the fundamental threat architecture in place,” Al Aranki says.

The damage is already structural, regardless of what diplomacy produces. The IEA has called the Hormuz closure the largest supply disruption in the history of the global oil market, and the IMF has slashed its 2026 growth forecasts to a 1.4% contraction for Saudi Arabia, with all other GCC countries facing even steeper contractions, Al Aranki notes. Infrastructure damage across more than 80 Gulf energy facilities runs to an estimated USD 58 bn on her count, with the Ras Laffan LNG complex alone potentially needing up to five years to fully repair. “These aren’t rounding errors — they represent a generational setback for some of these economies,” she says.

Where the Kingdom sits

Riyadh’s Red Sea access, the East-West pipeline, and its geographic depth leave it better insulated than Hormuz-dependent neighbors. “If there's a Gulf recovery trade, Riyadh captures a disproportionate share of it,” Al Aranki says. Still, the Kingdom carries the same long-term re-rating if the Iran question stays open.

The sharper risk is self-inflicted timing. “The Kingdom has had a very ambitious vision and there are question marks now about the gigaprojects and their continuity. Investors will be waiting to see the revised version of this vision and the destiny of such gigaprojects,” El Shenety says.

REMEMBER- The war landed on top of an already-underway gigaprojects recalibration. The PIF's 2026-2030 strategy shifted from acceleration toward discipline, Neom was broken up and rephased, The Line scaled back, and the fund booked an USD 8 bn write-down on its gigaprojects. Furthermore, the conflict has pushed Riyadh further toward a security-first, returns-first posture.

Why it matters

Gulf sovereign capital has been resilient. The PIF, Adia, and Mubadala have largely held their pace, and that is the headline most of Wall Street is reading. The signal beneath it is the one that counts: the PIF has already cut its international allocation from 30% to 20%, redirecting capital home — a shift the war accelerated and gave political cover, and one global markets have not fully priced. “The war didn’t cause this shift entirely, but it accelerated it and gave it political cover,” Al Aranki says.

Foreign inflows are the harder story. Strikes on critical infrastructure, elevated maritime ins., and a wave of retail and construction bankruptcies in the Kingdom in 1Q are the variables anyone deploying fresh capital is watching. Sentiment will recover when the threat architecture changes, and so far it hasn’t, according to Al Aranki.

Short term, a real but shallow recovery is underway. Hormuz reopening and oil-price stabilization strip out the acute crisis premium, and sovereign continuity reads positively. “The Gulf, especially Saudi Arabia, will stay a very attractive region for investors across many sectors, but most global investors will be cautious in the short term,” El Shenety says. Global capital, he added, is “waiting to see the strategic priorities of Gulf countries and the revised national agendas before they jump in again.”

Medium term, the 60-day window is a recurring risk event. If talks collapse or the ceasefire breaks — both plausible given the disagreements already in the open — Gulf risk reprices fast. Al Aranki frames it as a positioning question rather than a forecast: “I’d want meaningful hedges on any medium-term Gulf positioning until there’s clarity on at least the nuclear file.”

The long term is a different story. The Gulf model’s exposure — Hormuz dependency, desalination, and food imports — has been demonstrated in a way investors and sovereigns won’t unsee. As long as Iran retains ballistic capability and the Israeli-Iranian confrontation stays open, foreign capital prices a higher permanent risk premium on Gulf exposure.

What’s next

Things to watch for: The 60-day clock from the 17 June MoU runs to mid-August. Watch for whether the Switzerland track produces movement on the nuclear issue, any break in the Lebanon ceasefire, and the revised gigaproject roadmap investors are waiting on before committing fresh capital.