The transformations that have unfolded across the Persian Gulf over the past two decades cannot be adequately explained through the conventional language of interstate rivalry, geopolitical competition, or shifting regional alliances alone. What is taking place is a deeper restructuring of power in one of the world’s most strategic energy regions—a restructuring rooted in changes within global capitalism, evolving patterns of capital accumulation, the crisis of traditional rentier-state models, and the relative decline of the United States’ capacity to sustain a unilateral regional order.

For decades, Saudi Arabia functioned as the dominant power on the Arabian Peninsula. Massive oil revenues, a larger population than its Gulf neighbors, control over Islam’s holiest sites, a strategic partnership with the United States, and a central role in global energy markets gave Riyadh a position from which it could shape regional politics and exert considerable influence over neighboring states.

What is declining today, however, is not Saudi Arabia’s power in an absolute sense. Rather, it is the historical form of Saudi hegemony itself—a hegemony grounded in the relative monopoly of oil wealth, religious legitimacy, and unwavering Western support.

Gulf Capitalism in Transition

Throughout much of the late twentieth century, the Gulf monarchies were organized around a common economic model: the oil-based rentier state. Hydrocarbon revenues enabled governments to maintain political stability and provide extensive welfare benefits without relying heavily on taxation or broad social participation.

The globalization of capital, the expansion of financial markets, and technological transformations have gradually altered this model. Gulf states are no longer merely exporters of oil and gas. Their sovereign wealth funds have become major actors within global capitalism, channeling hundreds of billions of dollars into international banking, logistics, technology, renewable energy, military industries, tourism, and financial markets.

As a result, competition among Gulf states is no longer centered exclusively on hydrocarbons. Increasingly, it revolves around securing advantageous positions within the global circuits of capital accumulation.

Different states have pursued distinct strategies of integration into the world economy. Qatar has relied on its vast natural gas reserves, activist diplomacy, and transnational investments. The United Arab Emirates has established itself as a financial, commercial, and logistical hub linking Asia, Africa, and Europe. Saudi Arabia, meanwhile, seeks to diversify its economy through Vision 2030 and reduce its long-standing dependence on oil revenues.

These divergent pathways of accumulation have gradually weakened the material foundations of Riyadh’s traditional regional dominance.

Qatar and the UAE: New Centers of Capital Accumulation

The rise of Qatar and the United Arab Emirates is not simply the result of ambitious political leadership. It reflects their changing positions within the global economy.

Following the transfer of power in 1995, Qatar used its immense liquefied natural gas resources to become one of the world’s leading energy exporters. Through Al Jazeera, extensive international investments, and a diplomacy centered on mediation and strategic engagement, Doha transformed economic power into political influence. The Saudi-led blockade imposed on Qatar in 2017 ultimately revealed the limits of Riyadh’s ability to dictate regional outcomes as it had done in previous decades.

The UAE pursued a different trajectory. Dubai and Abu Dhabi emerged as major financial, logistical, and commercial centers whose economies are less dependent on direct oil exports than those of many neighboring states. Simultaneously, normalization with Israel through the Abraham Accords expanded the UAE’s access to advanced military, cyber, and security technologies, strengthening its position within the region’s evolving security architecture.

Power in the Gulf is therefore no longer concentrated in a single center. Doha, Abu Dhabi, and Riyadh have each become distinct poles of capital accumulation and political influence.

Iran, Yemen, and the Limits of Saudi Power

If political economy constitutes one dimension of the Gulf’s transformation, the changing regional balance of power constitutes another.

Despite decades of sanctions and international pressure, Iran has succeeded in cultivating networks of influence across Iraq, Syria, Lebanon, and Yemen. Regardless of one’s political assessment of these policies, their cumulative effect has been the emergence of a regional balance that constrains Saudi Arabia’s capacity to exercise unilateral dominance.

The war in Yemen offers perhaps the clearest illustration of this transformation. Saudi Arabia’s military intervention in 2015 was intended to restore a regional order favorable to Riyadh. Instead, the conflict evolved into a prolonged war of attrition that imposed significant financial, political, and strategic costs on the kingdom.

Yemen exposed a fundamental reality: even the wealthiest Arab state in the region could no longer impose its will on neighboring societies through military force alone.

In this sense, Yemen was not merely another regional conflict. It became a critical site where the structural limits of Saudi power were revealed. At the same time, Ansar Allah evolved from a localized insurgent movement into a regional actor capable of influencing the security of the Red Sea and major global trade routes.

The Beijing Agreement and a Relative Post-American Order

The Chinese-mediated rapprochement between Iran and Saudi Arabia in 2023 should be understood within this broader context. Its significance extends beyond the reconciliation of two regional rivals.

For decades, the United States served as the principal security guarantor and diplomatic broker in the Gulf. Today, however, China has become the largest trading partner for many states in the region, while its political influence continues to expand. Russia, meanwhile, has strengthened its role in regional energy and security affairs.

This does not signify the end of American influence. Rather, it suggests that the era of uncontested U.S. primacy is gradually giving way to a more complex configuration of power characterized by multiple centers of influence.

The Gulf monarchies themselves increasingly seek to diversify their strategic relationships rather than remain dependent upon a single external patron.

Contradictions of Gulf Capitalism

Despite remarkable economic achievements, the Gulf development model remains marked by deep structural contradictions.

A substantial share of economic activity depends on migrant labor. Millions of workers contribute to the production of wealth while remaining excluded from many political and social rights. This contradiction lies at the heart of contemporary Gulf capitalism.

Dependence on hydrocarbon revenues also persists. Although governments frequently emphasize diversification, oil and gas continue to constitute the central pillars of state finances. The global transition toward renewable energy and mounting climate pressures introduce significant uncertainties regarding the long-term sustainability of this model.

At the same time, widening inequalities, concentrated wealth, dependence on global financial capital, and vulnerability to fluctuations in the international economy raise fundamental questions about the durability of Gulf development strategies.

These tensions reveal that the region’s challenge is not simply geopolitical competition but the sustainability of a particular model of capitalist development.

Conclusion

The Persian Gulf is undergoing a transition away from an order in which Saudi Arabia functioned as the region’s uncontested hegemonic power. The rise of Qatar and the UAE as autonomous centers of capital accumulation, Iran’s growing influence within the regional balance of power, the consequences of the Yemen war, China’s expanding role, and the relative decline of U.S. unilateral dominance have all contributed to the emergence of a more multipolar regional order.

Yet the central issue is not merely the redistribution of power among states. Beneath these geopolitical shifts lie the deeper contradictions of Gulf capitalism itself—a system built upon the intersection of energy rents, global financial capital, migrant labor, and great-power security guarantees.

From this perspective, the decline of traditional Saudi hegemony should be understood as part of a broader process of regional restructuring driven by transformations in both capital and power. The decisive question facing the Gulf is not which state will ultimately prevail, but whether the region’s development model can adapt to the challenges posed by energy transition, climate change, demographic pressures, and the instability of the global economy.

The answer to that question, more than any geopolitical rivalry, is likely to shape the future of the Gulf in the decades ahead.Email