The Saudi-UAE Rivalry and Its Implications for Gulf Geopolitical Stability and Energy Markets

The intensifying rivalry between Saudi Arabia and the United Arab Emirates (UAE) in 2025 has emerged as a critical factor shaping geopolitical stability and energy market dynamics in the Gulf and Red Sea regions. As both nations vie for strategic and economic dominance, their competing priorities-ranging from military interventions in Yemen to infrastructure investments in the Horn of Africa-have created a volatile landscape for energy and infrastructure investors. This analysis examines the risks and opportunities for investors navigating this complex environment, drawing on recent developments and authoritative sources.

Strategic Competition and Geopolitical Fractures

The Saudi-UAE rivalry has escalated into direct confrontations, most notably the December 29, 2025, Saudi airstrike on a UAE-backed weapons shipment to the port of Mukalla in southern Yemen. This incident marked a rare public clash between the two Gulf powers, underscoring divergent strategic goals. Saudi Arabia prioritizes control over northern Yemen and key Red Sea corridors to secure its southern border, while the UAE has focused on consolidating influence in southern Yemen through proxies like the Southern Transitional Council (STC). The STC's expansion into Hadramawt and Mahra governorates-regions critical to maritime trade and energy security-has further strained relations.

This competition extends beyond Yemen. In Sudan, the UAE supports the Rapid Support Forces (RSF), while Saudi Arabia backs the government, deepening regional divides. Meanwhile, the UAE's alignment with Israel under the Abraham Accords contrasts with Saudi Arabia's cautious approach, complicating broader Gulf alliances. These fractures highlight a shift from cooperative GCC frameworks to a more fragmented, zero-sum contest for influence.

Energy Infrastructure as a Battleground

Energy infrastructure has become a focal point of the rivalry, with both nations investing heavily in the Red Sea and Gulf regions. Saudi Arabia's investments in Eritrea's Assab seaport and the UAE's stake in Somaliland's Berbera port reflect a strategic push to control critical maritime routes. Control over ports like Mukalla and the Bab el-Mandeb Strait- vital for global petroleum transit-has become a proxy for broader geopolitical dominance.

However, this competition introduces significant risks. The December 2025 airstrike on Mukalla Port, for instance, exposed vulnerabilities in energy infrastructure, with potential ripple effects on Gulf exports and global trade. Historical precedents, such as the 1990-1991 Iraq-Kuwait crisis, demonstrate how regional instability can disrupt energy flows, yet current OPEC and GCC mechanisms appear strained by the Saudi-UAE friction.

Investor Risks and Market Resilience

For investors, the rivalry poses dual challenges: geopolitical instability and market volatility. The December 2025 clash caused Gulf markets to retreat, reigniting concerns over the Bab al-Mandeb chokepoint's security. While energy prices have not yet spiked sharply-partly due to increased non-Gulf production and alternative export routes like Saudi Arabia's east-west pipeline-the risk of asymmetric threats (e.g., Houthi attacks) remains.

Investor risk assessments must also account for the UAE's Habshan-Fujairah pipeline and Saudi Arabia's Red Sea infrastructure projects, which aim to bypass vulnerable maritime routes. These initiatives reflect a growing emphasis on diversification and resilience, yet their success hinges on sustained regional stability-a fragile proposition given the current rivalry.

Opportunities Amidst Uncertainty