SOCOSIX Behind the Headlines for May/June 2026

The Iran War The British news magazine, The Economist, correctly depicts the Iran war as feeling like the movie Groundhog Day, with nearly the same series of events happening over and over again. Since the April 7 ceasef

June 15, 2026

SOCOSIX Behind the Headlines for May/June 2026

The Iran War

The British news magazine, The Economist, correctly depicts the Iran war as feeling like the movie Groundhog Day, with nearly the same series of events happening over and over again. Since the April 7 ceasefire, the U.S. and Iran have traded strikes, while President Trump fluctuates between threatening to resume fighting and expressing optimism that the two sides will come to some kind of agreement. Several times, Trump and his advisors have suggested that a deal was in reach, only for no such deal to materialize.

The latest instance occurred on May 28. We understand that a back channel involving VP Vance and a leading IRGC insider reported progress earlier in the week. For the first time since April, this Iranian insider is sounding positive that an agreement is in its final stages. Several sources and news outlets reported that U.S. and Iranian negotiators reached an agreement on a 60-day memorandum of understanding that would open the Strait of Hormuz now and prepare for talks by the two sides on Iran’s nuclear program. It is unclear what the “off-ramp for Trump” is included in this report. Of course, neither Trump nor the current Iranian leadership have approved the deal, and the President has indicated he will not be rushed, especially as both countries continue to exchange fire.

Further complicating the situation is Israel’s war against Hizballah in Lebanon, where there is also a flimsy cease-fire that realistically seems to be in name only. Netanyahu has declared war on Hizballah, and his campaign against this group has had a devastating impact on the country as a whole, killing more than 3,200 people, displacing hundreds of thousands more, with Israel claiming almost 20 percent of the country’s territory out-of-bounds.

Comment: Although the Administration portrays the Israel/Lebanon conflict as a separate issue from the Iran war, the two are fundamentally linked. Without a solution here, any ‘peace agreement’ between Iran and the U.S. will be tenuous at best.

This is only one reason why the Iran war is proving to be a strategic failure for the U.S., as several leading analysts argue. A more fundamental reason for this pessimism is that this conflict has battered allies’ economies by driving inflation up and hitting economic growth as a result of unrealized war goals — whether this was regime change, or destruction of Tehran’s nuclear program, or the diminution of its missile and drone capability or all three.

Instead, the war has empowered a new and largely unknown group of Iranian hardliners, blocked a vital shipping lane, handed a financial windfall to Russia, and enhanced China’s self-projected role as the world’s sole superpower genuinely promoting peace and security. On May 27, President Trump insisted he is patient and will not relent until his goal for nuclear safeguards from Iran are achieved, despite forthcoming midterms and pain at the pump for U.S. consumers.

In the absence of a fundamental change in the current environment, it is difficult to believe that any permanent solution will be possible and that the threat of even more serious conflict will hang over the Gulf for many years to come. End Comment.

U.S.-China Summit

President Donald Trump’s high-stakes, two-day summit with Chinese leader Xi Jinping concluded on May 15, with Washington and Beijing offering differing—and at times divergent—accounts of what was discussed. The White House readout of the bilateral meeting focused on trade and economic cooperation, including the establishment of two new boards—one on trade and the other on investment.

In an interview with Hannity after the visit, Trump said Xi told him China would not provide Iran with military equipment. The White House, meanwhile, asserted that Xi underscored China’s opposition to the militarization of the Strait of Hormuz and that both countries agreed Iran must never obtain a nuclear weapon. Neither point appeared in China’s readout.

Missing from the U.S. account was any mention of the sensitive issue of Taiwan, which was central to the Chinese summary of the meeting. According to Beijing’s statement, Xi stressed to Trump that Taiwan is the most important issue in China-U.S. relations: if handled properly, the bilateral relationship can remain broadly stable; if not, “the two countries will have clashes and even conflicts, putting the entire relationship in great jeopardy.”

Comment: Was the visit a success? In one sense, yes: both sides struck a publicly cordial tone. No grand bargain emerged, but none was realistically in reach given the two countries’ divergent positions. It was also the first visit by a U.S. president to China in nearly a decade, and Xi has apparently agreed to reciprocate with a visit to Washington next September. Continued high-level engagement between the world’s two most powerful nations should be viewed as a positive development.

Yet the atmospherics of the visit favored China. With no clear end in sight to the Iran war, the United States appeared overly eager to cut deals that might shift attention from its most pressing strategic problem. Despite the presence of leading U.S. business executives, few major sales or cooperative arrangements were announced, and those that were sounded modest. For example, Boeing secured a commitment to sell 200 aircraft to China—not the 400 to 500 that had been anticipated. (By comparison, France’s Macron won sales of 300 Airbus jets during his 2019 visit.) China also pledged to buy more beef, pork, and soybeans, but no figures were disclosed. Meanwhile, Beijing secured crucial Nvidia chips for ten AI operations.

In a telling symbol of the changed world order, China invited Russia’s Putin to Beijing just five days after Trump’s departure. He received a similarly warm welcome, a comparable banquet, and much the same entertainment. In terms of symmetry, neither Trump nor Putin got everything he wanted: Putin again left Beijing without the long-sought Power of Siberia 2 gas pipeline agreement. Comment.

Impact of the Gulf War on the Gulf Cooperation Council (GCC) Members

Once there is an agreement which ends the current conflict (or maintains some kind of long-term stalemate), there is little doubt that the heretofore rapidly developing Saudi and Gulf State economies and societies will be severely impacted. Following the U.S. and Israeli attacks that devastated Iran’s then religious and military leadership, Iranian missiles and drones arced across Gulf skies in a manner that stunned its Arab neighbors and the world. Even Oman, Tehran’s trusted backchannel and longtime mediator, was not spared.

Not only was U.S. military infrastructure in several of these countries damaged or destroyed, but key economic and other civilian sites were targeted, as well, impacting severely Qatar’s ability to produce its LNG and the UAE’s ability to operate its massive aluminum facility. Moreover, despite the announced April 7 ceasefire, the Strait of Hormuz remains blocked for shipments of any kind from almost every country.

Gulf states intercepted many Iranian missiles and drones, but not enough to calm anxiety among citizens and the region’s large expatriate population. Fatalities have been reported in several countries, airports have been bombed and shut down, and tourism—especially in Qatar and the UAE—has largely stalled for now. The U.S., which has an ambassador in only one of the affected countries, Bahrain, will need a major effort to restore confidence in its ability to defend the region. A war expected to last no more than four days and to alter the face of an up to now unyielding military theocracy, currently appears likely to continue in power with revenge seared into the ‘successor’ regime’s new DNA.

Comment: The trauma will outlast the missiles, and how the Gulf recovers will matter to the world. This war has underscored four stubborn truths:

–First, the Middle East remains irreplaceable as an energy supplier — despite U.S. shale and the renewables revolution.

–Second, this conflict has raised serious doubts about both American capacity and long-term willingness to protect allies from low-cost but effective asymmetric Iranian threats. Replenishing the expensive munitions used by the U.S. and its allies will be neither quick nor cheap.

–Third, the Gulf — which has built an image as a haven of stability and prosperity in a volatile region — is not immune to regional instability. Over time, this might also reshape how the Gulf deploys its wealth. The stakes extend beyond English football clubs, Egyptian real estate, and Silicon Valley companies. Gulf investments have long suppressed U.S. borrowing costs. A change of strategy could affect even the deepest market on earth if we fail to manage our shortcomings effectively. And,

–Fourth, no Gulf leader is likely to emerge from this conflict unchanged. They will face questions: how to defend their borders and cities; how much to trust Washington or other powers; how to engage with the global economy and markets; and how to cooperate with each other. The longer the war simmers, the deeper the transformation. End Comment.

UAE Considering Monetary Swap?

The United Arab Emirates is quietly preparing for prolonged economic shock from the Iran war. As part of this, a source at the U.S. Embassy in Abu Dhabi has confirmed that the UAE had discussed the possibility of a currency swap line with U.S. Treasury Secretary Scott Bessent during meetings in Washington in May. The source said that, despite denials from the UAE Embassy in Washington that this wealthy Emirate requires external financial backing, a currency swap which would allow the UAE central bank with the Treasury would effectively give Abu Dhabi access to U.S. dollars to support its currency and foreign reserves in case of market stress.

Comment: The war has imposed significant costs on the UAE and other Gulf economies. Since the war started on February 28, stock market values have plunged in excess of $125 billion. In addition, there has been disruption in its oil and logistics businesses, and a complete disruption to its tourism and aluminum industries. The deeper concern here is that the problem is not one of short-term liquidity but of confidence in the country’s long-term economic model which is built around stability and security. Dubai launched a $272 million stimulus package in late March to support businesses, but this may not be enough to keep capital from leaving the economy. Of course, the UAE maintains a deep financial cushion to safeguard against economic volatility, including almost $300 billion in foreign reserves and a massive sovereign wealth fund of around $2.7 trillion. These sums can buy a lot of security unless the country is occupied by a hostile power. End Comment.

Cyber-Risks from latest AI models

In early April, Treasury Secretary, Scott Bessent, and outgoing Federal Reserve Chair, Jerome Powell, called in Wall Street, and leading bank CEOs to warn them about potential cyber risks posed by Anthropic’s latest AI model and several others, according to a source familiar with the discussion. They wanted to make sure banks were taking steps to protect their systems. Anthropic has restricted Mythos—its most powerful model—to a small group of technology and finance companies, including Amazon, Apple, and JPMorgan. Those firms are part of “Project Glasswing,” an effort to identify vulnerabilities and protect critical systems before comparable models become more widely available.

Comment: Asked for his reaction to the reported meeting, one Anthropic employee said he was not authorized to comment, but eventually acknowledged that the prospect of Mythos going rogue “ feels terrifying.” End Comment.

U.S. Continuing to Source Rare Earth Supplies

Washington-backed mining firm USA Rare Earths agreed in May to acquire Brazil’s Serra Verde for $2.8 billion. The deal is the latest in a series of acquisitions as the U.S. seeks to reduce its dependence on Chinese supplies. China still dominates the rare earth market, holding 49 percent of global reserves and accounting for 69 percent of production.

Beijing’s brief export restrictions in 2025 on these minerals—which are critical to the defense and energy sectors, among others—sent shock waves through the U.S., Europe, and Japan. In response, Brazil has tried to attract foreign investment to develop its significant rare earth potential. President Luiz Inácio Lula da Silva recently said Brazil holds 23 percent of the world’s reserves, even though only about one-third of the country has been fully mapped. Even so, Brazil currently accounts for just 0.1 percent of global production.

Comment: A USGS source tells us that the United States holds just 2.1 percent of global rare earth reserves, ranking seventh worldwide after China. Even so, the U.S. currently produces 12 percent of global output, second only to China’s 69 percent and well ahead of Australia, the third-largest producer. Australia accounts for 3.3 percent of production despite holding 6.6 percent of global reserves. End Comment.

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SOCOSIX Behind the Headlines for May/June 2026