The Neutral Position
Oman is the only Gulf state to have maintained continuous diplomatic relations with Iran without interruption — including through the Iran nuclear negotiations, the Saudi-Iran proxy conflicts, and the Abraham Accords period. Simultaneously, Oman maintains strong relations with the United States (US-Oman FTA 2009), Israel (quiet diplomatic contact historically), Russia, and China.
This neutrality is not naïveté — it is a deliberate, sophisticated foreign policy strategy that Sultan Qaboos developed over five decades and Sultan Haitham has maintained.
Economic Value of Neutrality
Mediation premium: Oman has hosted multiple rounds of backchannel diplomacy — US-Iran nuclear talks, Houthi-related negotiations, and other regional dispute resolution. This positions Muscat as a trusted neutral venue, attracting diplomatic traffic and the associated economic activity.
Trade route security: Oman’s neutrality reduces the probability of being targeted in regional conflicts — a significant port security premium for Salalah and Duqm, which handle international shipping.
Investor confidence: A neutral, stable, non-confrontational government reduces political risk premiums for foreign direct investment. The geopolitical risk component of Oman’s country risk premium is genuinely lower than most Gulf peers.
IMEC positioning: Oman’s neutrality makes it the most credible GCC participant in an India-Middle East-Europe Corridor that requires cooperation across deeply divided parties.
Green hydrogen buyers: European and Asian hydrogen buyers want supply chains without geopolitical risk — Oman’s neutrality is an asset in competing for off-take agreements with more geopolitically exposed exporters.
Risks to the Neutral Position
Strait of Hormuz: Oman controls the southern shore of the Strait — any Iranian action to close the Strait affects Oman directly regardless of its neutrality. This is the unavoidable geopolitical vulnerability.
US-Iran escalation: If US-Iran tensions escalate to direct military conflict, Oman’s ability to remain neutral while hosting US military infrastructure (Masirah Island, Seeb air access) would be severely tested.
Saudi-Iran normalisation: The 2023 China-brokered Saudi-Iran normalisation, if sustained, reduces Oman’s unique value as a bridge channel — though Oman’s broader neutrality role extends beyond the Saudi-Iran axis.