Middle East quick take: Homecoming

President Trump had a triumphant Riyadh homecoming today, announcing a flurry of commercial deals on his first official foreign visit since returning to office in January. As we have previously noted, the GCC countries have achieved most favored nation status at a time when Washington is having a much more contentious relationship with other traditional American allies. While officials in the region were very cautious about expressing a preferred candidate in the run-up to the US election, a universal theme we have heard in our travels was that America was “open for business” when the more transactional President Trump occupied the White House in contrast to a less hospitable investment environment during the Biden years. President Trump’s ebullient speech praising the Kingdom's homegrown reform drive also stands in marked contrast to President Biden’s fraught fist bump with the Saudi leader during his August 2022 visit to Jeddah.

In addition to the $142 billion defense deal that is expected to include aircraft, missiles, and radar systems for various US manufacturers, the Nvidia chip deliverable is especially noteworthy as it had become a key Riyadh request in the Saudi-US grand bargain discussions. The AI buildout is a top priority for leaders across the region, and we expect further deal announcements in the coming days. On the heels of the prior announcement of an MOU on US-Saudi civilian nuclear partnership, it looks as if many of the core components of the US-Saudi grand bargain have seemingly been achieved with this visit.

Notably absent from the agenda has been the expansion of the Abraham accords. While President Trump did indicate that he still sees Saudi-Israel normalization as his “dream,” he conceded that it would happen at the Kingdom’s time and choosing. By contrast, Biden administration officials had seemingly sought to keep normalization as a key component of any larger bilateral agreement despite the Saudi leadership’s insistence that a ceasefire and clear progress on a Palestinian state were prerequisites for such a diplomatic move.

“While OPEC officials maintain that the US played no role in the decision to accelerate the phase-in of the voluntary barrels, the oil price environment has provided a beneficial backdrop to the Presidential visit from the Washington standpoint.”

Helima Croft, Head of Global Commodity Strategy & MENA Research, RBC Capital Markets

While there were no public discussions of the oil price from the Saudi side, there were announcements of Aramco US refinery and LNG investments. We continue to note that incremental additions from the accelerated phase-in of voluntary barrels remain relatively modest and come against the backdrop of greater seasonal demand in the region. Moreover, the collective OPEC cut of 3.66 mb/d runs through 2026.

Riyadh has emerged as a key center of diplomacy hosting multiple rounds of Russia- Ukraine peace talks, and today was the setting for the surprise announcement that the US will be lifting sanctions on Syria. With the President traveling to Doha, we will be watching to see whether there is progress to craft a ceasefire in the 18-month war in Gaza following the release of the American hostage Edan Alexander.

President Trump had harsh words for Iran, blaming the country for being the cause of multiple regional conflicts and vowing to take Iranian oil exports to zero if the country does not agree to forgo nuclear weapons. And yet, one might read a potential softening of the US position to Tehran as President Trump did not revive threats to take military action against the country or call for a full dismantlement of the nuclear program. Since President Trump’s last visit to region, both Riyadh and Abu Dhabi have normalized relations with Iran and have sought a diplomatic solution to the nuclear standoff as part of an effort to de-risk threats to their ambitious economic transformation plans.