US president-elect Donald Trump will face challenges in the Middle East when he begins his second term. AP
US president-elect Donald Trump will face challenges in the Middle East when he begins his second term. AP
US president-elect Donald Trump will face challenges in the Middle East when he begins his second term. AP
US president-elect Donald Trump will face challenges in the Middle East when he begins his second term. AP

Trump faces changing landscape in Middle East ahead of second term


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As US president-elect Donald Trump prepares for a second term, he confronts a Middle East that has undergone major shifts, with evolving alliances and power dynamics that will demand a recalibration of US foreign policy.

In Syria, the regime of former president Bashar Al Assad fell in December, and Damascus now presents opportunities for the US, as well as challenges owing to a possible resurgence of extremist groups.

Iran’s regional influence has waned after a series of setbacks unravelling its so-called Axis of Resistance. The loss of the Assad regime dealt Tehran a blow, severing a critical land bridge to its Lebanese proxy, Hezbollah. For decades, Iran was able to supply weapons and support to Hezbollah across the Syrian border. Both Hezbollah and Hamas, Iran’s proxy in Gaza, have been weakened by more than a year of war with Israel.

Saudi Arabia has cautiously restored relations with Iran through a 2023 China-mediated deal and is less likely to align with a renewed US “maximum pressure” campaign against Tehran.

In Gaza, a ceasefire deal has been reached, while in Lebanon a 60-day truce between Israel and Hezbollah is set to end this month, just days after Mr Trump is sworn in.

This week, in farewell remarks at the US State Department, outgoing President Joe Biden sought to defend his foreign policy legacy. “New challenges will certainly emerge in the months and years ahead, but even so, it’s clear my administration is leaving the next administration with a very strong hand to play, and we’re leaving them and America more friends, stronger alliances,” he said.

However, critics argue that Mr Biden’s legacy is overshadowed by the 15-month war in Gaza, which has killed more than 46,700 Palestinians, local health authorities have said. His military support for Israel, despite the significant humanitarian crisis in the enclave, has drawn criticism.

The Biden administration has also failed to finalise a deal to establish ties between Israel and Saudi Arabia amid conflicts waged in the Middle East since October 7, 2023. Before that, the two nations were drawing closer to an agreement, which was confirmed by Saudi Crown Prince Mohammed bin Salman in a September 2023 interview with Fox News.

Saudi Crown Prince Mohammed bin Salman greets US President Joe Biden in Jeddah, in 2022. Saudi Royal Court
Saudi Crown Prince Mohammed bin Salman greets US President Joe Biden in Jeddah, in 2022. Saudi Royal Court

“For Trump and the Israelis, the biggest political victory in the Middle East is a tripartite deal between the US, Israel and Saudi Arabia that addresses the major concerns of those countries,” former US ambassador to Iraq and Kuwait, Douglas Silliman, told The National.

Gaza ceasefire

The ceasefire agreement between Israel and Hamas is set to take effect on Sunday. Even as Israel’s cabinet delayed until Friday its vote to ratify the phased, complex deal, US Secretary of State Antony Blinken said he was “very confident this is moving forward”.

Both Mr Biden and Mr Trump have taken credit for the ceasefire. But analysts suggest the political timeline in Washington played a role in reaching a deal. Observers say the incoming Trump administration’s approach influenced the negotiations, while Mr Biden's government was not interested in pursuing a resolution.

Mr Trump had previously sounded a clear warning: if the remaining hostages in Gaza are not released by the time he takes office, there will be “hell to pay”. He has been less clear, though, about what that threat entails.

“Why now? The answer is Trump,” said David Des Roches, a former US Defence Department official involved in Gulf policy who is now with the US National Defence University’s Near East South Asia Centre for Strategic Studies. “Trump’s unpredictability pushed this forward. Hamas feared greater destruction and Israel worried Trump might turn against them if they failed to act. A new leader can often overcome stalemates early in their term. If Trump wants to act decisively, he needs to do so quickly.”

It is believed that Mr Trump’s personality might also play a role in US-Israel relations and how much Israeli Prime Minister Benjamin Netanyahu can push boundaries, said Hala Rharrit, a former US diplomat and State Department spokeswoman who resigned last year over Mr Biden’s policies on Gaza.

“Trump projects force and confidence, but if he doesn’t back that up with concrete actions, Netanyahu will exploit the situation,” Ms Rharrit told The National. “They are both dominant and shrewd negotiators, which could either foster strong alignment or lead to sharp clashes.”

Ultimately, it will depend on who is “whispering in his ear”, she added. “If he’s adopting an America first policy, then he wouldn’t send billions of dollars in arms to Israel. That means reconsidering support for Israel when it directly threatens US national security interests.”

Syria

Mr Trump previously said the US “should have nothing to do” with Syria and opposed escalated military involvement. However, this does not mean Washington can afford to ignore the risks there, particularly given the persistent threat posed by ISIS.

While the incoming president has consistently viewed US involvement in Syria as a peripheral issue, he has, in the past, accepted the argument that a US presence is necessary to prevent further instability, noted Mr Des Roches.

“However, it’s likely that he will look for the first opportunity to withdraw the limited US forces currently in Syria,” he said. “The situation on the ground remains uncertain, with no clear understanding of who is in control or how Syria will be governed. A decision on US withdrawal will likely depend on the evolving political landscape.”

US troops remain in Syria primarily to support the Syrian Democratic Forces (SDF), a Kurdish-led militia that has played a key role in the fight against ISIS. In the aftermath of the Syrian civil war, the US shifted its focus to tackling extremist groups in the east of the country, where the SDF has maintained control over key oil-producing regions.

“Trump’s initial focus on Syria may not be centred on Syria itself, but rather on Turkey,” said Mr Des Roches. “Ankara remains adamantly opposed to the Kurdish semi-sovereign region in Syria, which it perceives as a safe haven for the Kurdistan Workers’ Party [PKK]. This issue is expected to dominate discussions in Syria in the early months of Trump’s second term.”

Turkey considers the SDF to be an extension of the PKK, a militant group designated as a terrorist organisation by Ankara and some western nations. The PKK took up arms against the Turkish state in 1984. While the US maintains its support for the SDF in its fight against ISIS, it has also designated the PKK as a terrorist group, leading to persistent tensions between the US and Turkey.

Iran

The Iran that the first Trump administration faced in 2017 was a dominant force in the Middle East. Today, Tehran is reeling from significant setbacks. Its direct attacks on Israel last year failed to deter its arch-foe and instead exposed Iran's weaknesses.

Analysts predict that in his first days back in office, Mr Trump will take steps to reimpose his “maximum pressure” strategy on Iran. Both Marco Rubio, Mr Trump's nominee for secretary of state, and incoming national security adviser Mike Waltz have publicly advocated tougher policies during their time in Congress.

Marco Rubio has been nominated by Donald Trump to be Secretary of State. Getty Images / AFP
Marco Rubio has been nominated by Donald Trump to be Secretary of State. Getty Images / AFP

“Trump wants to weaken the government in Tehran to the point where it will want to engage in serious conversations with Washington,” said Mr Silliman. “He wants to be seen as the president who negotiated major geopolitical and geo-economic deals, especially since it was [Barack] Obama who brokered the JCPOA,” he added, referring to the 2015 Iran nuclear deal, or Joint Comprehensive Plan of Action. “It wasn’t Trump’s deal and he wants to secure a better one.”

Tehran, though weakened, remains resilient. The regime has survived several domestic protests and continues to prepare for more friction with Israel and the US. This week, Iran’s navy received its first signals intelligence ship, while its army recently took delivery of 1,000 new drones. This month, Iran launched two-months-long military exercises, which included the Islamic Revolutionary Guard Corps holding war games simulating the defence of key nuclear sites, such as Natanz, against missile and drone attacks.

Mr Trump might consider negotiations with Tehran, said Mr Silliman. “It’s possible that he would want to pursue a new nuclear deal, one that not only addresses Iran’s nuclear programme but also reduces or eliminates its support for regional proxies.”

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Updated: January 20, 2025, 12:05 PM