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A diplomatic crisis on the Arabian Peninsula is turning into a protracted standoff, and some analysts now say the risk of armed conflict is emerging.
The dispute between Qatar, a major natural gas exporter, and its neighbors is now entering its fifth week. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut diplomatic ties with Qatar and implemented a partial blockade on June 5 in a bid to bring the tiny Persian Gulf monarchy in line with Saudi-dominated foreign policy.
Some analysts initially thought the parties would seek a resolution by the end of the Muslim holy month of Ramadan, but last week, the anti-Qatar alliance issued a series of harsh demands.
"It's escalated to a stage where it's very difficult for both sides to back down," Firas Modad, analyst at IHS Markit, told CNBC this week.
The demands include non-starters such as shutting down Al Jazeera news and closing a Turkish military base. The coalition also calls on Qatar to end its alleged ties to terrorist groups and political opposition figures in Gulf nations and Egypt. It demanded Qatar pay reparations and submit to compliance reviews going forward.
Qatar has rejected the demands. That is likely to trigger a series of additional economic and political sanctions against the government in Doha, causing the impasse to stretch out for months, risk consultancy Eurasia Group concluded in a briefing this week.
"The crisis will continue to escalate before the Qatari leadership ultimately adjusts its policy positions, or in a slightly less likely scenario, opts to cement an alliance with Turkey and closer ties with Iran," Eurasia Group said.
Arabian Peninsula and Iran, source: Google Maps
Qatar, the world's largest exporter of liquefied natural gas, has long chafed the region's pre-eminent Sunni Muslim power Saudi Arabia by attempting to forge its own foreign policy. That includes maintaining ties to Riyadh's Shiite Muslim rival Iran, which shares a massive gas field with Qatar and has sent food supplies to Doha since the crisis began.
Meanwhile, Turkey has moved forward plans for military cooperation with Qatar. On Friday, fresh Turkish armed forces arrived at the military base in Qatar, where training missions began last week.
Charles W. Freeman Jr., U.S. ambassador to Saudi Arabia during the first Gulf War, this week suggested the recent escalation risks pushing the crisis into armed conflict.
"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.