MENA Strategic Bulletin

UK restores ties with Syria as Sharaa faces Israel dilemma

On July 5, the UK officially restored diplomatic relations with Syria, marking the latest milestone in the new Syrian government’s mission to return to the international stage. British Foreign Secretary David Lammy visited Damascus as part of London’s first ministerial visit in 14 years, pledging £94.5m ($129m) in aid.

The visit came just days after US President Donald Trump issued an executive order that revoked the designation of Hay’at Tahrir al-Sham (HTS), the ruling party of Syria’s transitional government, as a terrorist organisation.

Meanwhile, Syrian President Ahmed Al Sharaa travelled to Abu Dhabi for talks with UAE President Mohammed bin Zayed. According to Syrian state media, the discussions focused on strengthening economic cooperation and attracting Gulf investment to aid Syria’s post-war recovery. Sharaa’s visit comes amid mounting US and Emirati efforts to encourage Syria’s participation in the Abraham Accords, with American officials publicly acknowledging pressure on Damascus to establish ties with Israel.

Stakeholder and regional impact

The UK’s decision to re-establish diplomatic ties with Syria reflects a growing international consensus on the validity of the new government’s diplomatic and economic reintegration project. The UK’s approach is also driven by clearly defined interests: Lammy cited reducing the risk of irregular migration, ensuring the dismantlement of Syria’s chemical weapons arsenal and confronting terrorism as key priorities.

To encourage the new government to cooperate on these objectives, the UK had already eased sanctions in April, unfreezing the assets of Syria’s central bank and 23 other entities, including major banks and oil firms.

For the UAE, Syria represents both a political opportunity and a test of its regional influence. Increased economic and political collaboration with the Syrian government will prove profitable as Syria rebuilds its economy and reintegrates diplomatically.

At the same time, as an early signatory to the Abraham Accords, the UAE is playing a central role in regional efforts to promote normalisation with Israel, and appears to be pursuing the same agenda when it comes to Syria. In April, Abu Dhabi hosted indirect talks between Syrian and Israeli representatives. Emirati efforts have unfolded in parallel with US pressure, including President Trump’s personal appeal to Sharaa in May to normalise relations with Israel.

While Sharaa appears receptive to deeper regional engagement – during his visit to the UAE he publicly called for strategic partnerships with “Gulf brothers” – he must also manage the realities of his domestic and regional alliances. Any move towards normalising relations with Israel will provoke backlash from regional allies such as Turkey, and could prove catastrophic on the domestic scene in the context of Syria’s fragmented domestic factions.

As a result, Sharaa is likely to proceed with caution, preferring economic cooperation and limited diplomacy with Israel over formal normalisation. Reports indicate that a preliminary security agreement may be under discussion, paving the way for normalisation further down the road.

The Trump administration’s removal of HTS from the US list of Foreign Terrorist Organisations indicates that the roadblocks to Syria’s reintegration are being dismantled faster than expected. While full cooperation with Israel carries risks for Sharaa and could undermine the legitimacy he enjoys from his core constituency, such diplomatic “gifts” from the US and the UAE will come with the expectation that he takes discernible steps towards full normalisation.

What’s next?

Israeli reports indicate that Sharaa is expected to sign a preliminary security agreement with Israel, which will be seen as a foundational step towards normalisation. While no formal timeline has been confirmed, Emirati and American officials will continue to press for momentum. Israeli Prime Minister Netanyahu and Sharaa are expected to meet in Washington DC ahead of the UN General Assembly in September.

For now, Syria’s immediate focus remains on stabilising its battered economy, with the World Bank estimating a modest 1% GDP growth this year, and on the challenging task of uniting and disarming the country’s fragmented armed factions. These domestic factors will also shape how Sharaa responds to external pressures and diplomatic overtures.

Houthis Capture Hostages in Red Sea as Attacks Escalate

The Red Sea crisis, ongoing since the October 2023, flared up this week with multiple incidents, including the sinking of two Liberian-flagged, Greek-owned ships in the Red Sea and an Israeli airstrike on multiple sites in Yemen.

On Sunday, following the Houthi sinking of the Magic Seas, Israeli forces launched a series of airstrikes targeting ports in Hodeidah, Ras Isa, as-Salif and a coastal power plant at Ras Qantib. As a result, the Houthis sharply escalated their military activity. A ballistic missile was fired at Israel’s Ben Gurion Airport in what Yemeni Armed Forces spokesman Yahya Saree called a “qualitative military operation”. The second ship, the Eternity C, was targeted on Monday, leaving four dead and 15 missing.

This escalation is part of the Houthis’ declared effort to disrupt maritime trade linked to Israel and to pressure Tel Aviv into halting its operations in Gaza. “No company can be permitted to transport goods related to Israel,” said Houthi leader Abdel Malik al-Houthi, warning that Israeli-linked navigation in the Red Sea, the Gulf of Aden and the Arabian Sea will remain a target. The result has been a rapid surge in regional instability that is reverberating well beyond the battlefield. 

Stakeholder and regional impact

The escalation in the Red Sea underscores a growing threat to commercial and maritime security. The Houthis have demonstrated increased operational capability and strategic intent by sinking two international trade ships and attempting a direct missile strike on Israel’s Ben Gurion Airport. Their declared goal is to shut down Israeli-linked navigation until hostilities in Gaza cease.

The economic fallout has been swift. According to maritime industry analysts, war risk insurance premiums for Red Sea transit more than doubled within one week, going from 0.3% to 0.7% of a vessel’s value. With the Suez Canal already strained and global shipping companies reconsidering routes, continued instability could significantly disrupt supply chains and drive up shipping costs worldwide.

Despite the Houthis’ assertiveness, their current campaign may have its limits. Iran, traditionally the group’s primary backer, is preoccupied with its own losses following its direct confrontation with Israel. Tehran’s attention is now partially diverted, and its appetite for escalation appears limited. This leaves the Houthis operating with more autonomy but less support. In this context, the decision to detain six crew members from the Eternity C was taken to create leverage should any negotiations come to light.

Meanwhile, pressure on Israel is mounting from another direction. The US is increasing diplomatic efforts to press Netanyahu’s government towards a ceasefire in Gaza. The Red Sea attacks add an additional layer of strain, making the war not only diplomatically costly but also economically and logistically harmful. The risks to international shipping and the potential for escalation could serve as a wake-up call to members of Israel’s security cabinet and the US that the current status quo is unsustainable. The Houthis appear to be betting on exactly that.

What’s next?

The Houthis have made clear that their campaign will persist “until the aggression against Gaza stops and the blockade is lifted”. With Israel maintaining its military operations in Gaza and now extending its reach into Yemen, a quick de-escalation appears unlikely.

The maritime dimension of this conflict is likely to intensify. More vessels may be targeted in the coming weeks, particularly those with direct or indirect ties to Israeli firms. Naval forces including the EU’s Aspides task force may bolster their presence in the Red Sea in response. Commercial carriers may be forced to reroute, increasing transit times and insurance costs.

As Netanyahu meets with President Trump in the US, the Red Sea crisis is likely to feature prominently in their discussions. A ceasefire with the Houthis will likely be tied to progress on a ceasefire in Gaza. Trump, who has already ramped up diplomatic pressure on Netanyahu, is expected to push further towards de-escalation.

However, negotiations remain encumbered by the unresolved issue of post-conflict governance in Gaza, which continues to stall comprehensive ceasefire efforts. Despite international political pressure mounting on multiple fronts, Netanyahu will insist on a short-term cessation of hostilities over a durable resolution.