The Middle East's strategic landscape has shifted profoundly from direct confrontation between Arab states and Israel, economic boycotts, and the Palestinian question. Today, the central regional dynamic is an overt and covert alignment between Israel and several Arab states, driven in large part by the need to contain Iran as the principal regional threat. This transformation has seen Gulf states, including Saudi Arabia, the United Arab Emirates, and Qatar, alongside Israel, achieve significant economic prosperity, with some now reporting higher per capita GDP than Japan.
This economic ascendancy coincides with the decline of traditional regional powers such as Egypt, Syria, and Iraq. A new regional architecture is forming, largely under US strategic guidance, built around these “moderate Arab” states and Israel. This structure is driven by a move from a traditional hydrocarbon-based economy toward a new model centered on advanced technology, artificial intelligence, nuclear energy, and defense innovation. Recent US-Israeli military actions against Iranian assets, coupled with Iranian retaliatory strikes against Israel and Gulf states, have reportedly strengthened this emerging alignment.
Who Profits
The new economic dynamics create major opportunities for capital accumulation, extending beyond the Middle East into the Indo-Pacific. Israel’s strengths in artificial intelligence, energy, and technology, combined with the Gulf’s financial power and investment capacity, are forging a new economic frontier. Major US technology corporations, including Google, Apple, Meta, Amazon, Microsoft, and Nvidia, maintain deep engagement with Israeli human capital and technological expertise. The US defense industry also shows increasing interest in Israel’s operational experience and innovation.
Gulf states, particularly the UAE and Saudi Arabia, are adding another layer to this economic momentum through major AI investments, financial sophistication, and an attractive investment climate. Israeli companies are deepening their links with the UAE, while the UAE and Saudi Arabia are simultaneously building stronger economic relations with India. This convergence of capital and technology is creating significant economic momentum across regions. Japanese enterprises, such as SoftBank, are already active in this space, with calls for further integration of Indo-Pacific economic dynamism with the capital flows now building between Israel and the Gulf.
Israel’s defense industry, shaped by extensive combat experience, has recorded major export growth. It is advancing defense cooperation with Asian countries through combat-proven systems, joint development, technology transfer, shared intellectual property, localized production, and collaborative research and development. Reports indicate that Israeli defense products are often more cost-effective than US equivalents, offering local production options and fewer proprietary “black box” components. This defense sector growth serves to bolster the security and economic vitality of nations like Japan.
The State's Role
The US vision for the region is built in part on expanding the Abraham Accords, with a particular focus on including Saudi Arabia. Such normalization would carry enormous strategic significance due to Riyadh’s role as Custodian of the Two Holy Mosques, potentially creating ripple effects across the broader Muslim world. This alignment aims to stabilize relations between Israel and moderate Muslim states and further constrain forces deemed extremist. A Middle East order anchored by these states and Israel would also facilitate the US in shifting military resources toward the Indo-Pacific, aligning with its formal strategic reorientation since the Obama administration.
This reorientation is framed as necessary to strengthen deterrence against China’s unilateral attempts to alter the status quo in the Indo-Pacific. Integrating Israel, described as the Middle East’s most militarily advanced state and a de facto US ally, into this framework is presented as a means to strengthen this deterrence. Japan, for its part, is urged to strengthen its defense capabilities, including air defense, and improve deterrence against North Korea and China, aligning its national interests with the expansion of Israeli defense exports and cooperation. The continued diplomatic presence of UAE and Bahraini ambassadors in Israel even during the Gaza war demonstrates how defense cooperation to safeguard national security can take precedence over historic positions on Palestine.
Liberal Inadequacy
The Palestinian issue, once the central imperative of the “Arab cause,” now functions primarily as part of the region’s public diplomatic language, while practical policy is increasingly guided by national interest. Saudi Arabia’s main stated condition for normalizing relations with Israel is the establishment of “a clear path to a two-state solution.” However, the rapid development of Israel and the Gulf has shifted priorities, and the Palestinian issue no longer occupies the same central position it once held in regional politics.
In his 2025 address to the United Nations General Assembly, Shigeru Ishiba supported a two-state solution while simultaneously backing the expansion of the Abraham Accords. This position reflects a strategic understanding that prioritizes regional stability to free US resources for the Indo-Pacific and integrates Israeli involvement to strengthen deterrence among “like-minded” Indo-Pacific nations. The focus remains on Israel’s high-tech and defense industries, combined with Gulf financial capacity and investment appeal, to support Japan’s security and economic vitality, framing a national-interest-driven approach as the most effective strategic path.