The US-Saudi nuclear deal announced this week is a sign that Washington is trying to shore up ties with the Gulf states, which have been fraying due to the Iran war. The conflict itself has escalated this week, with the Houthis announcing a blockade of the Bab el-Mandeb Strait. This may not be existential for Saudi oil output but it could lead to some near-term disruptions. And the conflict has led to growing concerns about sovereign debt risks in Bahrain. Its neighbours may be forced to step in with pledges of further financial support to reassure investors that it can avoid a devaluation and sovereign default.
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