Bloomberg:

An expanded soccer tournament, a direct flight, clandestine meetings and a pledge to release prisoners of war; diplomacy is breaking out as Gulf Arab nations back away from a Donald Trump-inspired confrontation with Iran. And the signs are everywhere.

Last week, Saudi Arabia, the United Arab Emirates and Bahrain played their first games of the 2019 Arabian Gulf Cup in Qatar after a last-minute decision to take part -- an apparent breakthrough in a 30-month feud that saw them halt trade and flights over Qatar’s links with Iran and support for Islamist groups.

Meanwhile, the Saudi-led coalition that’s fought Iranian-backed Houthi rebels in Yemen since 2015 began releasing jailed Houthis, as efforts to end the conflict gather momentum. Oman is quietly hosting high-level meetings, according to people familiar with the matter, and even Iranian President Hassan Rouhani has hinted at direct channels with the U.A.E.

Spooked by the prospect of a catastrophic war with Iran and its proxy militias across the region, Gulf monarchies are in the midst of a strategic rethink. The U.A.E., whose economic model relies in large part on its international links, quickly realized it had most to lose from a military escalation. It had removed most of its troops from Yemen by the end of a turbulent summer that saw oil tankers targeted and a U.S. drone downed in the Gulf without significant American response.

While the humanitarian catastrophe unleashed by the Yemen war trained an unwelcome spotlight on Saudi Arabia, it took a brazen strike on Saudi oil installations -- which knocked out half the country’s crude production -- to ram home the risks and prove that Trump was not about to ride to his allies’ rescue.

“The attacks shattered any illusion of this magical U.S. security umbrella,” said David Roberts, an assistant professor at King’s College London who studies the Gulf. “It burst the bubble and showed that Iran had the willingness to both do something astonishing like the attack on Aramco facilities and the capability to carry it out.”

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