Saudi’s wartime resilience

June 3 (Reuters) – Overnight attacks on Kuwait and Bahrain have delivered a sharp jolt to a ceasefire that has looked fragile from the outset. Iranian strikes damaged Kuwait’s airport, killed one person and injured more than 60, while Bahrain said it intercepted missiles and drones targeting U.S. military positions. The flare-up — alongside U.S. strikes near the Strait of Hormuz — underscores how easily hostilities continue to break through the tenuous truce, with the vital waterway still largely closed and oil prices reacting swiftly.

Despite U.S. President Donald ​Trump’s insistence that negotiations are continuing, channels between Washington and Tehran look to have stalled, with Iran saying it has halted exchanges via intermediaries and signalling it will resist any perceived overreach in negotiations or ceasefire ‌terms. A tentative outline deal remains unsigned, reinforcing the sense that the ceasefire is not a bridge to de-escalation so much as a holding pattern under strain.

This week, we track a war that continues to reshape the Gulf: from warnings of prolonged oil supply disruption, to Saudi Arabia’s emergence as a regional safe haven — and, on a storied Lebanese hilltop, a fortress seized by Israel that captures the conflict’s enduring symbolic weight.

– ADNOC’s trading chief Philippe Khoury warned that August could be a tipping point for sharply higher oil prices if demand rises while the Iran war supply crisis persists, with full ​supply chain recovery potentially taking until mid-2027. Transit through the Strait of Hormuz will remain below pre-war levels while peace remains uncertain, and even hedged airlines face grounding due to physical jet fuel shortages, not cost, he said.

– Syria recorded ​nearly 12,000 aircraft transits in May — more than double February’s figures — as regional airlines rerouted around airspace disrupted by the Iran war. The diversions could generate up to $5.9 million in overflight revenue ⁠at Syria’s new flat fee of $499 per flight. However, European and Asian carriers largely continue to avoid Syrian airspace, with Gulf airlines driving most of the surge.

– IAEA chief Rafael Grossi visited the UAE’s Barakah Nuclear Power Plant following a drone strike last month, ​offering Abu Dhabi both technical and moral support. He said Emirati authorities responded swiftly by shutting down a reactor. Repairs to physical infrastructure and an external power line are already under way, with completion expected within weeks.

The numbers tell a story that would have seemed unlikely when Iran moved to shut down shipping in the Strait of Hormuz more than three months ago. Capital is flowing into the kingdom from nervous Gulf neighbours, with an investment adviser reporting an acceleration in fund establishment demand and wealthy residents repatriating assets to Riyadh.

Tourism tells a similar story: domestic travellers have more than compensated for a 13% drop in inbound visitors, keeping national hotel occupancy at 66% in the first quarter, a figure that throws into sharp relief a projection by Moody’s Analytics that Dubai occupancy could sink ​to around 10% in the second quarter, compared with 80% in February.

On the ground, businesses confirm what the data suggests. Companies are still talking expansion, restaurants are full, and entrepreneurs are flying to Riyadh to find the deal flow that has dried up elsewhere ​in the Gulf.

But the safe-haven narrative has limits. A $33.5 billion first-quarter budget deficit — wider than projected — is an important counterweight to the optimism. Export sales fell sharply for a third consecutive month in May’s PMI survey, a sign that Saudi resilience is real but inward-looking — dependent on what ‌the kingdom buys ⁠from itself rather than what it sells to the world. Oil volume losses, even partially offset by higher prices, remain a structural drag.

The more enduring question, though, is what the war leaves behind. When Saudi Arabia’s $925 billion Public Investment Fund released its 2026-2030 plan in April, the kingdom was already pivoting away from capital-heavy prestige projects like NEOM toward logistics, AI, tourism and industry. Where years of policy drives produced incremental progress, more than three months of conflict have made the pivot feel irreversible. On the ground, logistics platforms report daily calls from new customers rerouting cargo through Red Sea ports, with hubs like NEOM touting faster routes. War is turning policy aspiration into economic reality.

Saudi Arabia may ultimately be remembered not merely as the Gulf state that weathered the Iran war best, but as ​the one the war most durably transformed.

China is ​expected to tap deeper into its record crude oil ⁠inventories as refiners cut imports further while maintaining output curbs to minimize refining losses, analysts and industry officials said.

Tepid demand from the world’s top crude importer is partly capping global oil prices, which fell 19% in May even amid a strained ceasefire between the U.S. and Iran. Read more from Chen Aizhu and Sam Li.

Israeli forces captured Beaufort Castle in southern Lebanon on Saturday, returning to a fortress that has served as a strategic prize and a psychological battleground for nearly a millennium.

Perched high above ​the Litani River with commanding views ⁠stretching to the Golan Heights and the Mediterranean, the site has been seized by nearly every power that has sought to dominate the Levant. Saladin took it from the Crusaders. The Knights Templar took it back. The Mamluks followed. In modern times, PLO fighters used it as a guerrilla base before Israel seized it during its 1982 invasion and held it until its withdrawal in 2000 — after which the yellow Hezbollah flag flying from its battlements became a symbol of Israeli defeat.

That history makes the castle’s capture freighted with meaning in a week when ⁠Lebanon has emerged ​as a focal point of the regional crisis. Israeli Prime Minister Netanyahu hailed it as an act of psychological and military reclamation. For Lebanese, it is ​occupation made visible, with Israeli forces once again looking down from the region’s most commanding hill, said Mohanad Hage Ali, deputy director for research at the Carnegie Middle East Center.

UNESCO, which this year placed Beaufort on a special enhanced protection list, calls it one of the best-preserved medieval castles in the Middle East. Its ​walls still bear the scars of the armies that have fought over it.

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