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Saudi-US nuclear deal sparks fear of arms race across the Middle East

(CNN) — For two decades, oil-rich Saudi Arabia has sought nuclear technology. Now an agreement with Washington to formalize Riyadh’s goal, however, has sparked concern that the deal, coupled with the messy aftermath of the war between Washington and Tehran, could plunge the region into a new arms race.

The most controversial part of the agreement – reportedly granting Saudi Arabia a future option to enrich uranium on its own soil with less oversight from the International Atomic Energy Agency (IAEA), that’s garnered the strongest reactions from Iranian, Israeli and American commentators.

But in Tehran, where the United States and Israel launched a war in February to destroy Iran’s nuclear program, a move that raised the possibility of Tehran changing its doctrine to build a bomb, some officials actually welcomed the possibility of a new arms race, effectively asking: Why should the Saudis have nuclear capabilities when we can’t?

“Naturally, if an arms race were to take hold in this region, we would have more freedom of action than anyone else,” Iran’s Interior Ministry spokesperson Ali Zeinivand told reporters on Wednesday night according to state-affiliated media. “America has a history of discrimination; in one place it says that some countries should have nuclear programs and in another place, it says that they should not.”

An Iranian hardline newspaper, Hamshahari, said Washington has “double standards” and accused Riyadh of playing a role in the September 11, 2001 attacks on the US.

“While targeting Iran’s peaceful nuclear program and launching an all-out war in the region (it is now) granting a fundamentalist Islamic country that played a role in the September 11 attacks the right to enrich nuclear weapons with the risk of nuclear proliferation,” the paper said.

While 15 of the 19 9/11 attackers were Saudi citizens, the Kingdom has consistently denied any government involvement in the attacks. The US has long said its strategic partner had no role in the attacks and that al Qaeda acted on its own in hijacking four commercial airplanes and flying them into the Twin Towers in New York City and the Pentagon.

Normalization with Israel

In Israel, where just three years ago the Biden administration required normalization with Saudi Arabia to approve the nuclear agreement with Riyadh, two Israeli sources said Netanyahu was not caught by surprise by the agreement.

“We knew it was coming, it was in the brewing for a while, and (President) Trump is now taking it another step forward,” one of the sources, an Israeli official, said.

Both sources said Israel does not see the agreement as finalized, and hope they will be able to influence the process, whether through direct communications with the White House or through US Congress.

The second Israeli source said Netanyahu still intends to try to push Trump to include progress toward Riyadh’s normalization with Israel as part of the package.

Trump said on Thursday that the “Civil Nuclear Deal” with Riyadh is “totally subject” to “Saudi Arabia joining the very respected and successful Abraham Accords,” in reference to the agreement signed in 2020 which established relations between Israel and several Arab countries, including Saudi neighbors like the United Arab Emirates and Bahrain.

In the fallout of the Israeli war in Gaza following Hamas attacks on Israel in 2023, Saudi Arabia has maintained that it will not normalize relations without Israel agreeing to a pathway for Palestinian statehood and calm in Gaza.

The most dangerous component of the deal

The Israeli official said Israel is specifically concerned about Saudi uranium enrichment which is the “the most dangerous component” of the deal.

“Israel’s main concern is not with the civilian nuclear energy agreement itself but with the uranium enrichment,” Yoel Guzansky, senior researcher at INSS and former official at the Israeli National Security Council, told CNN. “This could set a dangerous regional precedent.”

A 30-year nuclear agreement between the United Arab Emirates and the US, signed in 2009, is considered a “gold standard” under which Abu Dhabi agreed to international monitoring, no uranium enrichment, and no fuel reprocessing – factors that significantly reduced proliferation concerns. .

A clause in that agreement, however, stated that if “improved terms were agreed with another non-nuclear state in the Middle East,” Abu Dhabi could renegotiate and amend its agreement with Washington.

“At first, it will weaken the Emirati model, which was based on renouncing the right for enrichment,” Guzansky said. “Their agreement includes a clause that allows it to be opened if another country receives a better agreement, and they may ask to open it too. Turkey, Egypt will also be eyeing this closely. It also weakens the case against Iran.”

Nuclear arms race

Nuclear ambiguity hangs heavy over the region. Israel is believed to have a clandestine nuclear program and atomic weapons, while Iran has enriched uranium to near-weapons-grade levels and has long been suspected of preparing its infrastructure for weaponization, despite being a signatory to the UN’s Non-Proliferation Treaty (NPT). In addition, its former Supreme Leader issued a religious ruling banning nuclear weapons.

Turkey and Egypt have partnered with Russia to build peaceful nuclear programs but unlike Israel – are signatories to the NPT,. Turkey has also given the UN the right to access additional information and nuclear sites.

In February Turkey’s Foreign Minister warned that if Iran acquires a nuclear weapon, Ankara “may inevitably be forced to join the same race.”

The deal with Saudi Arabia is a peaceful nuclear cooperation agreement, often called a “123 agreement,” that includes a bilateral safeguards agreement, per the US Department of Energy. US Energy Secretary Chris Wright said the terms “uphold the highest standards of nuclear safety and nonproliferation.”

Before the kingdom can enrich uranium, a joint US-Saudi team must determine if the process is both warranted and commercially viable. Any facility would be built by the US without transferring sensitive technology, making these decisions long-term that will likely fall to future administrations. The deal otherwise bars Riyadh from developing its own enrichment technology or purchasing it from other countries for a decade, according to the Wall Street Journal, which first reported the deal’s approval.

MBS’s pledge

As the US conflict with Iran enters its fifth month, with no active negotiations taking place over Iran’s nuclear program, concerns are growing that Tehran may view a nuclear weapon as its only viable deterrent against future strikes, especially as it still retains nearly half -a -ton of highly enriched uranium.

A move to weaponize the Islamic Republic’s nuclear fuel could trigger a regional chain reaction and risks fulfilling long-standing warnings that an Iranian bomb would prompt Riyadh to seek nuclear weapons capabilities.

“Saudi Arabia does not want to acquire any nuclear bomb, but without a doubt, if Iran developed a nuclear bomb, we will follow suit as soon as possible,” Saudi Crown Prince Mohammed bin Salman said in a televised interview in 2018.

A year after the Saudi Prince’s comments, the Islamic Republic’s Supreme Leader Ayatollah Ali Khamenei, who was killed by the US and Israel in late February, said Washington has no problems building nuclear facilities in Saudi Arabia because the kingdom was dependent on the US.

“I personally will not be upset if they build (nuclear facilities),” the slain leader told followers in a speech at the time. “Because I know that, God willing, these will fall into the hands of the Islamic Mujahideen in the not-too-distant future.”

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Why no one knows what to expect from the Fed decision today

Washington (CNN) — The Federal Reserve has been unusually silent about the future path of interest rates, with Chairman Kevin Warsh offering few signals as policymakers grapple with renewed inflation concerns and a murkier economic outlook.Fed officials will have a chance to clarify their thinking when they announce their latest rate decision at 2 p.m. ET Wednesday, followed by Warsh’s post-meeting news conference at 2:30 p.m. ET.Inflation slowed sharply in June, according to the latest Consumer Price Index, largely due to lower energy prices that month as tensions briefly eased in the war with Iran. The encouraging inflation report prompted investors to scale back expectations that the Fed would need to raise interest rates for the first time since July 2023 in order to keep price pressures in check.But the conflict in the Middle East escalated earlier this month, triggering a spike in global energy prices last week. Tensions have eased in recent days, prompting energy prices to decline accordingly. However, shipping through two key waterways — the Bab al-Mandeb Strait and the Strait of Hormuz — remains subdued. Nearly a quarter of the world’s oil flows through the region. Meanwhile, Fed officials are debating how the rapid adoption of AI could impact inflation.The economic crosscurrents have made it difficult to understand where inflation is headed. Compounding that uncertainty, Warsh has declined to offer clear guidance on interest rates. Ahead of this week’s policy meeting, markets are split on whether the Fed will hold its benchmark lending rate steady for the fifth consecutive time or deliver a rate hike.It’s a lack of clarity not seen in years.“The Fed is looking at all these inflationary impulses and determining if they will be there over the longer term,” Narayana Kocherlakota, an economics professor at the University of Rochester and former president of the Federal Reserve Bank of Minneapolis, told CNN.“But it’s becoming very difficult to know what the Fed is going to do in the next few months, because Chair Warsh has been studiously uncommunicative about how the Fed is going to react to these changes in economic conditions,” Kocherlakota said.‘A complete unforced error’Warsh has long signaled that he intended to ditch a long-held practice known as “forward guidance.”Since 2000, Fed officials have generally used forward guidance to give investors a clearer sense of where interest rates were headed, arguing that greater transparency makes monetary policy more effective. But in his confirmation hearing in April, Warsh said he wouldn’t speculate on the economy’s path as chairman.With the Fed’s next move still an open question, it’s unclear whether Warsh’s break from decades of Fed communication has reduced — or amplified — uncertainty.“It’s going to lead to market volatility,” said Kocherlakota. “It makes businesses more reluctant to invest, meaning they’ll be less likely to demand workers to build the kinds of goods and services … because they’re uncertain about what the Fed is going to be doing.”“That kind of uncertainty, in my view, is a complete unforced error on the part of the Fed,” he added.On the other hand, some argue that Fed officials have in recent years spoken too frequently about the economy.“We got to a point where the dissection of the Fed’s forward guidance was so acutely broken down into parts that I’m not sure it helped in the way it was meant to help either,” said Kezia Samuel, chief market strategist at wealth management firm AssetMark.Risks of higher inflationFed officials largely agree that the central bank shouldn’t respond to higher energy prices with interest rate hikes because those costs are expected to come down on their own.“Conventional wisdom among central bankers is to look through one-time price increases, such as those associated with higher tariffs and a jump in oil prices,” Fed Governor Christopher Waller said this month.However, if price pressures persist, there’s a far greater the risk that inflation broadens well beyond the energy market. That could begin to erode Americans’ faith that inflation will eventually slow toward the Fed’s 2% annual target.To get a sense of inflation’s direction, central bankers focus on so-called core measures of inflation that strip out volatile food and energy prices. Core inflation gives economists and policymakers a good sense of how persistent price pressures may be, and to gauge Americans’ view of prices, officials look at market- and survey-based measures of inflation expectations.Neither of those measures warrant imminent rate hikes, but that could change if the Iran war spirals out of control or persists for an extended period.Meanwhile, Fed officials are closely watching Big Tech’s massive spending on AI data centers, which was discussed at the Fed’s June policy meeting.“Many participants noted that ongoing strong demand for AI infrastructure would likely sustain upward pressure on prices for technology products and electricity,” the meeting’s minutes read. “Most participants remarked that growth in economic activity that exceeded that of potential output, owing in part to strong AI business investment, could contribute to more persistent inflationary pressures.”The-CNN-Wire™ & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.
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