Iran and Saudi Arabia are set to renew their diplomatic relations and open embassies.

The effects of the unexpected agreement to reconcile Saudi Arabia and Iran will be felt globally, beyond just the Middle East, and will impact various aspects such as the ongoing Yemen conflict and China’s involvement in the region.

Following five days of talks in Beijing that were influenced by China, Saudi Arabia and Iran have agreed to restore their diplomatic relations after a seven-year stalemate. The tension between the two nations began in January 2016, when Saudi Arabia cut off diplomatic relations with Iran. This was in response to pro-government Iranian mobs attacking and looting the Saudi embassy in Tehran and the Saudi consulate in Mashhad after the execution of a Saudi Shiite cleric.

The decision to renew ties marks a significant step towards de-escalation in the Middle East, with the potential to impact other regional conflicts. It is noteworthy that China, which has good relations with both countries, played a role in facilitating the talks. This could indicate China’s growing role as a mediator in the region, and its interest in promoting stability and cooperation among Middle Eastern nations.

Under the new agreement, Iran has committed to ceasing attacks against Saudi Arabia, including those carried out by the Houthi rebels that Iran supports in the ongoing Yemeni civil war. This has been confirmed by officials from Saudi Arabia, Iran, and the United States. As part of the deal, the two countries have also agreed to reopen their embassies and missions on each other’s soil within the next two months. Furthermore, their foreign ministers will hold a summit soon to discuss and finalize other details of the reconciliation.

The move towards restoring diplomatic ties between Iran and Saudi Arabia is seen as a significant step towards reducing tensions in the Middle East, particularly in the Yemeni conflict, where the two countries have been supporting opposing sides. The agreement could also have wider implications for the region, given Iran’s increasing influence in the area and the rivalry between the two nations. As the diplomatic process moves forward, many will be watching closely to see how it affects regional dynamics and ongoing conflicts in the Middle East.

According to analysts, the development is considered a win-win situation for all three countries involved. Iran stands to benefit by ending its diplomatic isolation, while China gains by deepening its engagement in the region and showing that it is not just an energy consumer. Meanwhile, Saudi Arabia benefits by exerting pressure on the United States and subsequently gaining important diplomatic space that it has been unable to secure in recent times.

The recent reconciliation between Iran and Saudi Arabia does not assuage Saudi Arabia’s concerns about the Iranian regime’s continued expansion of its nuclear capacity. In response to fears around Iranian actions, Saudi Arabia has allegedly been in talks with the United States to develop its own civilian nuclear program. This is seen as an attempt by the Persian Gulf’s most powerful nation to seek greater security reassurances from its allies.

Despite the strained relations between the Biden administration and Crown Prince Mohammed Bin Salman, who is the de facto ruler of Saudi Arabia, the nation also wants fewer restrictions on US arms sales, as per the New York Times. Sources close to the negotiations suggest that the US is using this request as leverage to pressure Saudi Arabia to normalize its relations with Israel. This would further the Abraham Accords, which were negotiated by the Trump administration and resulted in diplomatic ties being established between Israel and the United Arab Emirates, Bahrain, Morocco, and Sudan subsequently joining.

The resumption of relations with Saudi Arabia is expected to provide a significant boost to Iran, which is currently grappling with severe economic challenges. The lack of a nuclear agreement with the West and the weight of US sanctions have taken a toll on the country’s finances, with the situation worsening since the protests that began in September.

The renewed diplomatic ties between Iran and Saudi Arabia are expected to have far-reaching consequences, with analysts predicting that the repercussions will extend beyond the Middle East. This is expected to impact various aspects, including the ongoing conflict in Yemen and China’s involvement in the region. As such, the development is being closely watched by global leaders, who are keen to understand the potential implications of this landmark agreement.

Financial analysts believe that this deal has the potential to have a lasting impact on the global economy, particularly if it leads to sustained peace in the region. However, at the time of writing, the price of crude oil had only decreased by one percent and appeared to be relatively unaffected by the news.