April 2024 Al-Monitor Trend Report 

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Months of scorching hot Mideast tensions sparked by the Gaza war finally boiled over into open attacks between Israel and Iran in April, giving shape to a long-feared eruption of a regional war that — alongside adding to the human toll — could deliver another jolt of economic pain locally and globally.

That saw the foes trade direct blows after Israel’s provocative April 1 strike on Iran’s embassy complex in Syria, which quickly put global markets and investors on edge as the conflict threatened to spiral out of control into all-out war. Oil prices rose towards $100 per barrel in early April, reaching six-month highs, while adding a new dimension to threats facing the Middle East’s fragile economic stability after months of turbulence. That said, April’s escalations demonstrated that global markets appear to be learning to live with this new era of Mideast conflict.

That crystallized after Iran’s unprecedented retaliatory attack on April 13, when it launched hundreds of mostly intercepted missiles and drones at Israel, followed by Israel striking Iran on April 19. Tel Aviv’s response was seen as modest, while Iran’s mild reaction also signaled de-escalation was underway (at least for now). After some jitters, global markets have moved on, and oil has since retreated back below $90 as of April 30. That comes alongside signs of business as usual in the Middle East, from Riyadh hosting over 1,000 leaders at the World Economic Forum meeting between April 28–29, to Algeria signing a $3.5 billion deal with a Qatari firm to develop the world's largest dairy farm.

Ultimately, after months of unrelenting turmoil, April delivered a key stress test for Middle East stability, but the potential for ongoing economic pain remains. In April, the International Monetary Fund (IMF) revised the region’s growth outlook downwards for the second time in 2024 amid geopolitical tensions. Pointing to Red Sea attacks and oil cuts, which have added to existing vulnerabilities related to high debt levels and elevated borrowing costs, the IMF projects growth to remain subdued, improving moderately to 2.7% in 2024, from 1.9% last year. That came after the IMF in January had forecasted 2.9% growth, down 0.5 percentage from October projections. 

A month from now those IMF projections could already be obsolete. Plenty of risk factors remain, which Al-Monitor will be tracking. In the meantime, our monthly trend report below digs into other essential storylines on our radar.  

Can OPEC survive the energy transition?

• As outlined in a memo by Kate Dourian, OPEC and lead producer Saudi Arabia have gone on the offensive since the end of Dubai’s COP28 summit, where all parties agreed to “transition away from fossil fuels.”

• Aramco’s CEO Amin Nasser, speaking at the CERAWeek conference in Houston on March 18, labeled the idea that oil and gas could be phased out as a “fantasy.” He dismissed suggestions that hydrocarbon demand would peak by 2030, an apparent reference to the International Energy Agency’s predictions that demand would peak before the end of the decade as carbon intensive fuels are replaced by cleaner energy sources.

• However, there is still speculation as to whether OPEC and the expanded OPEC+ alliance will survive the energy transition. Angola’s OPEC exit in 2024 raised the question of whether further defections are on the cards. There is a possibility that other African countries may follow if they are forced to accept lower quotas next year.

• There have been persistent rumors that the UAE has considered leaving OPEC. In 2021, Abu Dhabi held out for a higher baseline from which production cuts are calculated. That spat with Saudi Arabia was resolved, but the incident was a blow to OPEC’s image as a cohesive group.

• Today, the United States is the largest oil producer, well ahead of Saudi Arabia and Russia, both of which are bound by OPEC+ quotas. As it stands, Russia and several other OPEC+ members have been unable to meet quotas. The latest S&P Global Platts survey of OPEC’s production showed that four African countries produced below quota in February.

• By the IEA’s calculations in the March issue of its Oil Market Report, the 12 OPEC members produced 26.91 million bpd of crude oil in February, leaving the group with some 5.7 million bpd of spare production capacity, of which Saudi Arabia accounts for just over 3 million bpd.

The takeaway: There is little sign that OPEC, which marked its 60 anniversary in 2023, is about to fall apart, but maintaining unity going forward could be problematic. Restraining supply only to see producers outside OPEC and OPEC+ secure a larger share of what is likely to be a shrinking market for oil in the decade ahead might prompt a change of tactic.

Looking ahead: OPEC+ ministers will face another hurdle when a new quota system comes into effect in January 2025.  While some producers might suffer capacity downgrades, others — most notably the UAE — might seek capacity upgrades. That could create tensions that might lead to further OPEC defections. 

Another factor to watch: OPEC ministers will meet in early June and some analysts expect the group may start to unwind production curbs.

Nuclear energy ambitions near inflection point in the Middle East

• The nuclear energy industry could be poised to finally come of age in the Middle East: Abu Dhabi’s $20 billion Barakah Nuclear Energy Plant — the Arab world’s first commercial nuclear facility — fully connected to the national electricity grid in March 2024 as its fourth (and final) reactor unit successfully commenced startup operations. 

• Crucially, this unfolds as the embattled nuclear energy sector could enjoy a global revival. Dubai’s COP28 underlined a growing push to expand nuclear energy’s role in reaching global net zero carbon emissions by 2050. That saw 22 countries, including the UAE and Morocco, pledge to work together to triple nuclear energy capacity globally by 2050.

• Although wind and solar are expected to lead efforts to replace fossil fuels, the International Energy Agency (IEA) argues that achieving net zero will be harder without nuclear energy, which currently provides about 10% of electricity generation globally, the second largest low-emission source of electricity after hydropower.

• Regional players have long aspired to join the elite club of nuclear power producers, but those ambitions have largely been stymied by technical, political, security and safety factors. Among those ambitions, obviously none have loomed as large in as Iran’s ostensibly peaceful program — now even more so amid boiling regional tensions. 

• Meanwhile, the UAE has emerged as the Arab world’s nuclear energy leader, but Saudi Arabia’s aspirations cannot be ignored after news surfaced in early 2023 that Riyadh was asking the United States to help develop its civilian nuclear program as part of a potential peace deal with Israel. 

• Crucially, this nuclear energy comeback could also create opportunities for Gulf investors. Case in point: news surfaced March 29 that the UAE is pursuing European nuclear energy investments. Notably, an Emirati sovereign wealth fund is rumored among potential investors in the UK’s Sizewell large-scale nuclear project, which as of January was reportedly on track to raise about $25 billion by end of 2024. 

The takeaway: As the UAE’s Barakah power plant approaches full operational capacity, the Middle East is potentially on the cusp of a long-awaited nuclear age.

Looking ahead: The UAE should drive more dealmaking here, powered by its state nuclear power company seeking to become a global player. However, Saudi Arabia will also likely continue pushing aggressively to develop a nuclear program with or without US aid, even as current turmoil muddies next steps.

Another factor to watch: Innovations will be key to any nuclear resurgence. That centers on small modular reactors, or SMRs, a new generation of advanced nuclear reactors, which are garnering interest in the Middle East, including from Qatar, the UAE and Saudi Arabia.

Israeli gas exports to Egypt grow despite tensions over Gaza war

• As outlined in a memo by David Rosenberg, Israeli natural gas exports to Egypt, which began in 2020, grew sharply last year despite a brief drop in shipments after the Gaza war broke out. The export rise is part of a policy that sees Israel and Egypt as the leading players in an emerging East Mediterranean gas hub supplying the region and Europe.

• The Gaza war has strained Israeli-Egyptian relations, but Egyptian demand for Israeli gas continues to grow because local production cannot meet domestic demand. Egyptian output declined for a second year in 2023 by 11% to 60.1 BCM, its lowest since 2017. 

• As gas supplies were diverted to domestic needs, Egypt’s exports of liquefied natural gas to Europe fell by over 75% in 2023, according to Egypt’s Central Agency for Public Mobilization and Statistics. The export drop deprived the country of badly needed foreign currency, and to make up part of the loss, Egypt has been re-exporting Israeli gas to Europe. 

• Israel is determined to increase gas exports to Egypt. Last August, the government approved an increase in Tamar’s export quota to Egypt by about 38.5 BCM over the next 11 years, a figure that was increased to 43 BCM in December. Following the approval, the Tamar partners announced in February 2024 that they had secured a new gas sales agreement with Egypt’s Blue Ocean Energy to sell it an additional 4 BCM annually over 11 years.

The takeaway: The Gaza war has severely strained Israeli-Egyptian relations, but that has not prevented Israeli exports of natural gas from continuing to grow.

Looking ahead: Barring a major conflagration, the gas trade is likely to continue to expand out of economic necessity on Egypt’s part and out of Israeli geopolitical interests.

Another factor to watch: Big energy companies, backed by European policymakers seeking alternatives to Russian energy, are keen to develop the East Mediterranean hub, of which Israel is a key component. Only a sharp deterioration in the security situation is likely to deter any of the government or corporate players. 

UAE’s high stakes crypto bet poised for crucial test as Bitcoin rebounds 

• With Bitcoin’s price rebounding in 2024, the UAE could be primed to reap rewards after gambling on the scandal-plagued industry. Despite recent turbulence, the UAE has continued serving as a friendly jurisdiction for crypto as others crackdown — recently evidenced by Singapore-based exchange Crypto.com announcing on April 9 that it received full operational approval from Dubai’s crypto regulator (VARA). 

• The crypto world was reeling this time last year after crisis struck in late 2022, when FTX’s implosion erased $200 billion from the market in weeks. 2023 then brought intensifying regulatory scrutiny, with the SEC launching lawsuits against the world’s top two crypto exchanges, Binance and Coinbase. 

• The UAE’s proactive regulatory approach (coupled with its financial firepower and appeal as a destination for global wealth) had attracted hundreds of crypto-related companies by 2022. That includes becoming a key global location for crypto giant Binance.

• Unsurprisingly, FTX’s unravelling in November 2022 called into question the Gulf’s crypto embrace. Dubai’s crypto regulator (VARA) had granted FTX a preliminary license in July 2022 (which was revoked following its bankruptcy) and UAE investors reportedly made up 4% of its customers. However, the UAE has stayed the course.

• Dubai’s VARA awarded 19 regulated virtual Asset service providers (VASP) licenses in 2023. That continued into 2024 with another major exchange, OKX, announcing a VARA license in January 2024. Abu Dhabi also continued attracting global industry players in 2023. Notably, in December 2023 the cryptocurrency mining firm Phoenix Group raised $370 million through an IPO on Abu Dhabi’s bourse, the Middle East’s first crypto listing. 

• There are also signs the UAE has been boosting crypto oversight: in April 2023 VARA reprimanded the crypto startup Open Exchange (OPNX) for “unregulated activity” and later levied roughly $2.9 million in fines, among other moves. 

The takeaway: The UAE’s crypto gamble has uniquely positioned it to influence the industry’s next growth wave if market conditions continue improving. Early returns have already validated its strategy — so far.

Looking ahead: The UAE will likely continue gradually reigning in the crypto industry somewhat, which could scare off some, but an actual crack down is highly unlikely unless future bouts of volatility further poison the industry. 

Another factor to watch: A market recovery will likely stoke global competition, pushing more jurisdictions to emulate the UAE’s approach. 

What will post-election hardline domination mean for Iran's future?

• As outlined in a memo by Bijan Khajehpour, Iran’s recent elections underlined the depth of the gulf between the Iranian state and a society that has little confidence in the ruling establishment and a high degree of hopelessness in facing an authoritarian state moving toward a hardline agenda.

• On March 1, Iran held two elections, one for the 290-member Majles (parliament) and one for the so-called Assembly of Experts, an 88-member body tasked with supervising and electing the Supreme Leader. Nationwide voter turnout stood at 41%, including a minimum 5% invalid ballots, making this year’s participation the lowest since the inception of the Islamic Republic in 1979. 

• These were the first elections since the brutal crackdown on the 2022 Woman, Life, Freedom protest movement, and the low participation should be seen as a continuation of the tense relationship between state and society.

• Many experts believe that the elections were engineered to enable hardline forces in the Paydari Front to further consolidate their grip on power. These hardliners brand themselves as “revolutionary” and claim to be different than the older generation of politicians in the Islamic Republic. They want to fight the corruption and injustice and represent a third faction in addition to reformists and conservatives. 

The takeaway: Iranian society has never been so highly disengaged from politics. The question is whether the hardline agenda will become the dominant voice in the next few years and what that will mean for the country’s overall development.

Looking ahead: There will be political fallout from these deepening fissures. However, it is unclear whether it will lead to a further deepening of tensions or to reforms in governance structures. For now, the political constellation seems unsustainable.

Another factor to watch: Although overshadowed by its confrontation with Israel, Iran’s government continues to crackdown harshly on domestic dissent. That includes the recent news that the popular Iranian rapper Toomaj has been sentenced to death following his support for the 2022 anti-government protests.