The conflict in Yemen and an outline nuclear agreement between Iran and the West has thrust the region’s politics back into the spotlight. Although it looks like problems in Yemen are likely to drag on, the reaction in the Middle East’s financial markets has been muted. This is understandable given that Yemen is a small oil producer and trade ties with the rest of the region are limited. As for the Iran deal, fears have been raised that a final agreement (if one is reached) will allow Iran to raise its support for its various proxy militias in the region. If anything, though, over a longer horizon, we would argue that a nuclear agreement could result in Iran taking a more diplomatic approach to its relations with the wider world and, in particular, its neighbours in the Gulf.
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