Gulf states will likely be reluctant to contribute to the minimum $300 billion promised to Iran for reconstruction in the Memorandum of Understanding after months of unprovoked attacks, regional experts told The Jerusalem Post on Thursday.
On Wednesday, US President Donald Trump denied reports of the fund, asserting that neither the US nor Gulf partners would be expected to contribute to the endowment, though Vice President JD Vance earlier told CBS that Iran could receive a $300 billion reconstruction fund backed by Gulf states if it complies with the agreement.
The MoU demands: “The United States of America undertakes with regional partners to develop a definitive, mutually agreed plan with at least USD 300 billion for the reconstruction and economic development of the Islamic Republic of Iran. The mechanism for the implementation of this plan will be finalized as part of a final deal within 60 days. All required licenses, waivers, and permissions needed for the relevant financial transactions will be granted by the United States of America.”
Such a commitment would not be easily accepted by Gulf States, Bahraini analyst Dr. Ahmed Alkhuzaie, a managing partner at Khuzaie Associates, told the Post. While Gulf states were likely relieved by what they see as a “tactical pause,” there is an obvious fear that the financial terms of the agreement would allow Iran to further destabilize the region.
The pause, which has allowed energy exports to finally continue after months of disruption, “welcomes a deeper unease,” he explained. There is a well-founded fear that the release of frozen Iranian funds and the lifting of sanctions could “empower Tehran’s regional networks of militias and proxies, reinforcing the very threats the MoU was meant to contain.”
$300 b. in funds frees resources for militias in Iraq, Syria, Lebanon, Yemen
Though the funds would undoubtedly help stabilize Iran’s flailing economy, he explained that it would also free resources for Iran to invest in its militias in Iraq, Syria, Lebanon, and Yemen “that directly threaten Gulf security.”
“This is why Gulf leaders frame the MoU as fragile,” he said. “While they welcome the ceasefire and reopening of Hormuz, they fear the agreement may empower Iran rather than restrain it.”
After suffering months of attacks from Iran, the American commitment raises “the uncomfortable question of whether Gulf states would indirectly contribute to rebuilding the very adversary that targeted their infrastructure,” he noted, adding that Saudi Arabia, the United Arab Emirates, and Bahrain all feel that the fund “risks rewarding aggression and undermining deterrence.”
Even Oman and Qatar, the lowest advocates for mediation, would also “struggle to justify Gulf financial participation when public opinion remains raw from the damage inflicted on energy facilities, ports, and civilian infrastructure,” he stated.
Saudi Foreign Minister Prince Faisal bin Farhan told Al Arabiya on Wednesday that he had “no details” on the fund or the “concept behind it,” but admitted that there was a significant loss of trust in Iran, which was “only just” beginning to recover after the Beijing agreement in 2023. He asserted that trust would need to be rebuilt before financial investments could be addressed.
With that mentality shared by regional leaders, Alkhuzaie said there has been a push to see the fund tied to verifiable limits on Iran’s “regional interference and nuclear ambitions. Without such safeguards, Gulf capitals worry that today’s truce could become tomorrow’s strategic miscalculation, leaving them to face a more resilient and emboldened adversary.”
Practically, there are also apparent limitations that need to be addressed. Investments, he noted, require conditions that Iran cannot yet meet, such as the aforementioned trust, legal protections, and political stability, he explained. “Between enemy states, this mechanism simply cannot function: investment is not just financial – it is also a vote of confidence in the host country’s future. In the case of Iran, the situation is even more stark.”
“Sanctions, opaque regulations, and the ever‑present risk of conflict make Iran an unattractive destination for foreign direct investment,” he continued. “For Gulf states that have suffered direct attacks, the idea of channeling funds into Iran’s reconstruction is not only politically implausible, but economically irrational, as it would expose investors to heightened risks while strengthening a state still perceived as a strategic adversary.”
Tehran’s rampage halted, relieving Gulf states
International relations expert Dr. Arman Mahmoudian, research fellow at the University of South Florida’s Global and National Security Institute, took a slightly different stance, telling the Post that Arab states were likely relieved, as the war’s extension meant facing off against an increasingly trigger-happy Tehran.
While not willing to risk the agreement by openly rejecting the promised fund, Mahmoudian stressed that the US made the sizable commitment on behalf of its allies, meaning that Arab states can maintain distance with the simple explanation that it was never their initiative.
Other states may also see the potential fund as an opportunity to cage Tehran in financial interdependence, he added. “By investing in Iran and becoming more valuable economic partners, they may hope to reduce the likelihood of being targeted by Tehran,” Mahmoudian said.
Oman was targeted significantly less than other Gulf countries during Tehran’s rampage, which notably came as the Islamic regime courted the country into a deal to govern the Strait of Hormuz together.
Though many states would be unwilling to threaten the agreement, Mahmoudian noted that there were deep concerns on what the MoU meant for the psychology of Tehran. Largely presenting itself as a victor in the negotiations, there is a fear that the regime could become “more assertive” and bolder in its moves across the region.
“The fact that Iran was persistent and successful in including Lebanon in the MoU suggests that Tehran has no intention of resetting or reducing its regional ambitions. This is one of the main issues that worries Arab states,” he noted, referencing the inclusion of Israel’s war against Hezbollah in the agreement.
Though Trump denied that his goal was to install regime change, the war has restructured Tehran, leaving the Islamic Revolutionary Guards with greater power. The new status quo in Iran has Arab states feeling increasingly nervous, aware that the IRGC “has held a hostile view of the Arab states of the Persian Gulf, accusing them of collaborating with the United States, supporting Saddam Hussein during the Iran-Iraq War, and, in some cases, pursuing overt or covert normalization with Israel,” Mahmoudian said.
Many of the IRGC’s more pragmatic voices were killed either during the latest war or the war in June, which means “the likelihood of more radical and aggressive factions gaining influence is higher,” he highlighted.
Tempering the hardline voices is the fact that Iran has been in a near-constant state of instability. The June war, January protests, ongoing drought, years of sanctions, the blockade of Hormuz, damage to its proxy network, and the March war will likely mean Tehran avoids immediately provoking tensions, he theorized.
“Despite what it may gain from the MoU and any future deal, Iran has a great deal to reconstruct, recover, and rebuild, both domestically and regionally… Tehran is not in a position to enter another round of major hostilities. It needs a brief window for recovery,” Mahmoudian continued, though disclosed he expected the regime to immediately begin refinancing and rebuilding its proxy networks.
Having learned the importance of maritime security through the blockade, Mahmoudian suggested that Iran’s first action would be to invest in Houthis strength and loyalty, so that the The Bab el-Mandeb Strait is ready for the next round of conflict.
Dr. Kristian Alexander, a senior fellow and lead researcher at the Emirates-based Rabdan Security and Defense Institute and an adviser at Gulf States Analytics, took a similar stance to Mahmoudian, arguing that regional allies understand that the pause in fighting is necessary and reduces the immediate risk of an attack on its infrastructure.
Though accepting the need for a respite, Gulf states would not soon forget the regime’s willingness to attack the economic lifelines of its neighbors when it was placed under pressure, he explained. However, more damaging than Iran’s actions are those of the US.
“The agreement also reinforces a long-standing Gulf concern: major powers negotiate with Iran, but Gulf states live with Iran. Washington can sign an interim framework and move on to the next diplomatic phase. The Gulf states cannot. They must manage the consequences of Iranian missiles, drones, proxy networks, maritime coercion, commercial pressure, and ideological rivalry on a daily basis,” he outlined, adding that this was forcing many regional players to create their own channels with Tehran outside of the US process.
With the UAE’s economic model depending on stability, free navigation, investor confidence, aviation, tourism, logistics, and energy flows, the UAE will likely be motivated to engage with Tehran as a method of risk management, he said. Saudi Arabia, however, is waiting for a sign that Tehran’s conduct will change before embroiling itself in any meaningful economic investment.
Alexander shared that the events of the last few months will likely impact Gulf domestic investment, with countries eager to diversify export routes to avoid the same Hormuz chokehold the regime created, harden ports, expand air and missile defense, and increase maritime coordination.
In terms of investing in Iran, Alexander agreed that such a move would be difficult to swallow given the optics of paying an aggressor country. Though difficult, he imagined the UAE would contribute to such a fund “only if it is conditional, transparent, phased, and tied to verifiable Iranian restraint.”
“Abu Dhabi would not want to provide resources that could indirectly strengthen the IRGC, missile production, drone networks, proxy groups, or dual-use procurement. If Emirati capital participates at all (publicly or formally), it would likely prefer tightly controlled sectors such as civilian infrastructure, energy stabilization, transport, health, food security, or trade normalization under international monitoring,” he noted. “The UAE’s objective is not to make Iran stronger. It is to make Iran more invested in stability. Abu Dhabi has long believed that economic integration can sometimes moderate behavior more effectively than isolation alone. That does not reflect trust in Tehran; it reflects a pragmatic assessment of geography and the realities of living across the Gulf from Iran.”
Strategically, Emirati policymakers are inclined to understand that a “permanently isolated, economically distressed, and internationally disconnected Iran could be more prone to risk-taking, coercive behavior, and regional adventurism,” and so only an Iran invested in regional stability could encourage Tehran to elect a more peaceful doctrine.
“Gulf states will distinguish between economic stabilization and strategic empowerment. They may accept measures that prevent Iranian collapse, reduce incentives for escalation, and restore trade. But they will resist measures that allow Iran to convert economic relief into military leverage. The question for the Gulf is not whether Iran becomes richer. The question is what Iran does with the resources,” he concluded. “Gulf states will not reject the MOU because they need de-escalation. But they will not trust it simply because it has been signed. They will judge it by whether it changes Iran’s behavior in the Gulf. For them, the real test is not the signing ceremony. It is whether ships move safely through Hormuz, whether missiles stop falling on Gulf infrastructure, whether Iranian proxies stand down, and whether economic incentives produce restraint rather than renewed strategic confidence in Tehran.”
