"The Qataris and the Turks and others have said that these demands are unacceptable. So, we are clearly in a crisis with the potential to lead to armed conflict," he told the foreign policy blog LobeLog.
The severity of demands lends credence to the idea that Saudi Arabia's true goal is regime change in Qatar, said Helima Croft, global head of commodity strategy at RBC Capital Markets. If the demands were formulated knowing that Qatar would reject them, that at least raises questions about Riyadh's real objective, she said.
The U.S. State Department itself has questioned whether Qatar's alleged support of terrorism is truly what is driving the dispute.
Croft said she has gone from being primarily concerned about the lifting of the blockade to increasingly worried about Gulf countries blundering their way into a military conflict due to unintended escalation or miscalculation this summer.
"I now can't say this is not going to lead to some kind of military escalation," she told CNBC.
Violent outbreaks have already occurred amid heightened tensions. Iran alleged the Saudi navy killed an Iranian fisherman in a Persian Gulf confrontation two weeks ago. The Saudis later said the Iranian vessel was trying to carry out a terror attack on an offshore oil field.
Eurasia Group said the U.S. commitment to resolving the dispute is a critical factor. President Donald Trump has at times undercut efforts by the State Department to de-escalate the situation by tweeting his support for the Saudi-led group and publicly calling Qatar a funder of terrorism.
"If U.S. diplomatic investment in the dispute proves insufficient, or if Washington offers mixed signals, the likelihood that a diplomatic solution fails would increase," Eurasia Group said.