The next six months will see persistent high tension in the Middle East, driven by unresolved conflicts and limited diplomatic progress, with Iran's potential nuclear ambitions posing a major risk of escalation. Within 12 month and beyond outlook, the Iranian nuclear issue will likely reach a critical point, while regional powers vie for influence amidst ongoing instability in Syria, Gaza, and Yemen. A most concerning scenario involves Iran developing nuclear weapons, triggering military strikes and broader regional conflict, exacerbated by escalating tensions between Turkey and Israel and a more aggressive U.S. stance in Yemen.
Last updated: March 5, 2025
6 Month Regional Outlook
The Middle East will remain in a state of high tension, with unresolved conflicts in Gaza, Syria, and Yemen fueling instability. Efforts to impose political solutions will likely struggle due to deep divisions and lack of consensus among key regional and international actors. Iran’s weakened regional influence, coupled with increasing economic and military pressure, may push it to accelerate its nuclear ambition. Diplomatic efforts remain possible, but any move toward developing a weapon would very likely trigger preemptive military action, raising the risk of broader conflict. With Iran’s influence retrenching, regional powers like Turkey, Saudi Arabia, and Israel will maneuver to fill the vacuum. Even if the Gaza conflict de-escalates, Houthi influence in the Red Sea and broader instability in Yemen will likely sustain maritime security threats.
Key drivers
Development in Palestinian territories
Western sanctions against Iran
Iranian nuclear capabilities
Syria’s political stability
Events
E3 imposed deadline for Iran to conclude a new nuclear deal and prevent snapback sanctions - End of June 2025.
Conclusion of U.S.-led military mission in Iraq Operation Inherent Resolve, ending presence of coalition forces in certain locations in Iraq - End of September 2025.
Business Impact Estimation – Regional Summary for 0-6 months
Raw materials
Raw materials could face production and supply chain disruptions due to conflicts in the Middle East, particularly affecting those materials with significant global production levels concentrated in the region, such as bromine, boron, and pumice. Efforts to realize the untapped wealth in minerals in the Gulf States will continue; however, mining and exploration of raw material deposits in countries with active tensions will likely be hindered.
Logistics
Persisting tensions in Gaza continue to fuel uncertainty for trade across the Red Sea. Maritime logistics routes in the Middle East remain a major business risk with significantly reduced daily transit calls and trade volume through Bab el-Mandeb Strait and the Suez Canal. Ongoing tensions and economic pressure on Iran have raised concerns over the stability of the Strait of Hormuz as a critical energy transit chokepoint.
Energy
Energy markets will likely remain volatile as security threats across the Middle East impact oil, natural gas, and LNG production and exports. Heightened geopolitical and economic pressures on Iran could potentially disrupt crude oil flows from the Persian Gulf, further tightening supply. Planned crude production increases by OPEC+ members in Saudi Arabia, Iraq, Kuwait, the UAE, and Oman are likely to help stabilize prices and mitigate supply disruptions.
12 Month and Beyond Outlook
Most likely - State of high tension
The diplomatic window for addressing Iran’s nuclear ambitions will be extremely narrow, requiring a rapid and mutually acceptable de-escalation package between the U.S. and Iran. As a result, the Iranian nuclear issue will likely reach a decisive moment in 2025. Syria’s post-war transition will remain slow, with continued Israeli and Turkish posturing—Israel prioritizing security concerns while Turkey seeks to expand its regional influence. A durable peace settlement in Gaza will likely remain elusive, with no clear post-war roadmap. The unresolved situation in Yemen and instability in the Red Sea will remain closely linked to developments in Gaza, further complicating regional stability.
Most concerning - Wider Escalation
An absence of change in Iran’s behavior leads the E3 (France, Germany, UK) to re-enact snapback sanctions on Iran. Iran withdraws from the Nonproliferation Treaty (NPT) and develops a nuclear weapon. This is met by Israeli and U.S. airstrikes targeting Iranian nuclear facilities. Turkey deepens its military and political influence in Syria, creating friction with Israel’s aggressive security posture. Facing domestic pressure, Erdogan escalates his anti-Israel stance to consolidate nationalist support. The U.S. shifts its approach to the situation in Yemen, adopting a more forceful position that has repercussions particularly on maritime security in the Red Sea.