The Abraham Accords, signed in 2020, have emerged as one of the most consequential geopolitical and economic developments in the Middle East in decades. While they were initially presented as a diplomatic thaw between Israel and several Arab states, their real power has been the transformation of regional trade, investment, and financial flows. For Pakistan, a country historically committed to the Palestinian cause and reliant on Gulf partners for energy and remittances, the shifting sands of this new regional alignment present both opportunities and profound dilemmas.
In less than five years, Israel’s trade with the United Arab Emirates alone has skyrocketed from almost nothing to nearly three billion dollars a year, with projections suggesting it could surpass ten billion dollars within the next decade if the momentum continues. Israeli exports of technology, agricultural know-how, defence systems, and even consumer goods have penetrated Gulf markets at a pace few would have predicted when the Accords were first announced. The UAE, in turn, has leveraged its financial muscle to invest in Israeli energy projects and tech startups, including a one-point-one billion dollar stake by Abu Dhabi’s Mubadala in Israel’s Tamar gas field and multimillion-dollar injections into Israeli food technology companies. Bahraini and Moroccan engagement, though smaller in volume, has followed the same template of normalisation rapidly translating into economic integration.
The Abraham Accords have not only redrawn the map of Middle Eastern diplomacy but have triggered a cascade of financial and trade realignments that continue to reverberate across the region.
The strategic calculus behind this cooperation has been partially driven by shared concerns about Iran’s influence in the region. Yet the economic dividends have quickly taken on a life of their own. Emirati banks and Israeli institutions have built new channels for trade finance. Direct flights now carry business delegations and tourists between Tel Aviv and Gulf capitals. Joint ventures in solar energy, desalination, and agricultural innovation are sprouting across the desert, reshaping traditional supply chains. Even logistics corridors have been reimagined, with a land cargo route linking Israel through Jordan and Saudi Arabia into the UAE, offering an alternative to maritime transit during periods of regional tension.
For Iran, these developments have been framed as an existential threat and a deliberate attempt to encircle the Islamic Republic. Tehran has condemned the Accords as a betrayal of the Palestinian cause and a strategic manoeuvre orchestrated by Washington to forge an anti-Iran bloc. While Iran’s economy remains under sanctions, it has responded by intensifying its economic and diplomatic pivot toward China and strengthening ties with Russia. Iranian oil exports, primarily flowing eastward, have remained resilient, but the long-term concern in Tehran is that an Israel-Gulf economic corridor will isolate Iran from regional infrastructure development and potentially undercut its own energy leverage over neighbouring economies. Yet paradoxically, the same Gulf states normalising ties with Israel have quietly reengaged with Iran. The Chinese-brokered détente between Saudi Arabia and Iran in 2023 and subsequent rapprochements with the UAE and Bahrain underscore that Gulf capitals are determined to hedge their bets, pursuing diversified economic and security relationships even as they deepen ties with Israel.
Pakistan stands at a complex intersection of these shifts. Officially, Islamabad has rejected the Abraham Accords and reiterated that it will not recognise Israel until a two-state solution materialises. This position resonates deeply across Pakistan’s political spectrum and public opinion, where solidarity with Palestine is often linked symbolically to the unresolved dispute over Kashmir. Foreign Minister Ishaq Dar, among others, has declared that recognition of Israel without meaningful progress on Palestinian rights would amount to an abandonment of Pakistan’s historic commitments. Yet behind the rhetoric, Pakistani policymakers face an uncomfortable reality: the country’s economic fortunes are intimately bound up with the Gulf. The UAE is not only Pakistan’s largest source of oil imports but also a major investor and host to more than two million Pakistani expatriate workers. Saudi Arabia remains a critical partner providing deferred oil payments and financial bailouts during fiscal crises. Together with Qatar, these states account for billions of dollars in remittances, covering a substantial portion of Pakistan’s import bill and supporting the rupee.
From a financial perspective, the rise of an Israel-Gulf economic bloc carries significant implications for Pakistan’s future trade and investment prospects. The Gulf’s embrace of Israeli technology and defence industries could create a technological advantage that Pakistan will struggle to match if it remains entirely outside these emerging frameworks. Some Pakistani commentators have noted that Israel’s innovations in water conservation, precision agriculture, and health technologies align closely with Pakistan’s most urgent development challenges. The possibility of indirect access to such expertise through Gulf intermediaries is theoretically appealing but politically hazardous. Any move perceived as tacit engagement with Israel could trigger domestic backlash and alienate constituencies that see the Palestinian cause as a moral red line.
At the same time, there are clear risks to inaction. As Gulf countries shift portions of their trade and investment flows toward Israeli partnerships, Pakistan may find itself sidelined in regional development corridors. The burgeoning relationships under the I2U2 partnership-linking India, Israel, the UAE, and the United States-highlight how new economic forums are taking shape without Pakistan’s participation. If these partnerships mature into preferential trade and technology-sharing platforms, Pakistani exports could face stiffer competition in Gulf markets already saturated with Indian and Israeli products. Moreover, as Israeli defence systems become integrated into Gulf security architectures, Pakistan’s traditional military relationships with the UAE and Saudi Arabia could encounter new complexities.
For Iran, the Accords have hardened economic and ideological positions. Tehran has sought to double down on its “resistance economy” narrative and has offered cheap energy deals to neighbours willing to resist normalisation with Israel. Iran’s rapprochement with Saudi Arabia has helped reduce some of the immediate risk of confrontation, but has not diminished Tehran’s broader suspicion of Gulf-Israel ties. This dynamic puts Pakistan in a delicate balancing act: maintaining strategic ties with Riyadh and Abu Dhabi while avoiding entanglement in an economic realignment that marginalises Iran entirely.
In the long run, Pakistan faces a strategic question that will require a careful blend of pragmatism and principle. While official recognition of Israel is off the table for the foreseeable future, policymakers will need to consider whether limited, indirect economic engagement-through third-party partnerships or multilateral forums-could deliver development gains without crossing political red lines. At a time when Pakistan’s fiscal deficits and currency volatility constrain domestic policy options, tapping into regional growth could be a vital lever to stabilise the economy. Yet such engagement will require deft diplomatic management and clear communication to domestic audiences about the boundaries of cooperation.
The Abraham Accords have not only redrawn the map of Middle Eastern diplomacy but have triggered a cascade of financial and trade realignments that continue to reverberate across the region. For Pakistan, the stakes are high. As Israeli and Gulf economies integrate and Iran recalibrates its economic alliances, Islamabad’s decisions over the next few years will determine whether it can secure a place in the emerging economic order without compromising its longstanding commitments. The challenge will be to build bridges where possible and draw red lines where necessary, all while navigating an increasingly multipolar and transactional geopolitical landscape.
The writer is a financial expert and can be reached at jawadsaleem.1982@ gmail.com. He tweets @JawadSaleem1982