New Zealand is once again feeling the fallout of a geopolitical crisis. With a de facto blockade of the Strait of Hormuz in place, oil prices soared past the US$90 per barrel mark after New Zealand’s close of business on March 6.

Little sustained relief is in sight, particularly after Iran’s retaliatory strikes on the Gulf states continued over the weekend, even after a pledge by Iranian President Masoud Pezeshkian to limit attacks against neighboring countries.

The oil price spike and expected associated inflation will be a particular challenge for New Zealand Prime Minister Christopher Luxon, who had been keen to emphasize signs of economic recovery ahead of a general election to be held on November 7.

Despite being more than 14,000 kilometers away, New Zealand has long-standing links with the Middle East, especially in the Gulf region. Wellington has maintained an embassy in Riyadh, the capital of Saudi Arabia, since 1984. New Zealand’s embassy in Tehran is even older, having opened in 1975 as one of New Zealand’s first two diplomatic missions in the Middle East.

New Zealand’s embassy in Riyadh’s “Diplomatic Quarter” is located only a stone’s throw away from the U.S. Embassy compound that was hit by an Iranian drone strike last week.

Since taking power in 2023, Luxon’s center-right coalition government has sought to deepen relations with the six countries of the Gulf Cooperation Council, or GCC, made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE).

In late 2024, New Zealand concluded negotiations on both a Comprehensive Economic Partnership Agreement (CEPA) with the UAE and a free trade agreement with the wider GCC. The CEPA entered into force in August 2025, following a visit to UAE capital Abu Dhabi by Luxon earlier that year.

The close ties with the UAE may partially explain why Luxon was among an early group of leaders to hold a solidarity phone call with UAE President Sheikh Mohamed bin Zayed last week. The New Zealand prime minister’s conversation with “MBZ” on March 4 preceded similar calls from counterparts in more populous countries, including Indonesia, the Netherlands, and Romania.

Still, despite New Zealand’s links with the Middle East, Luxon last week downplayed Wellington’s stake, telling Parliament that the “final line of effort is diplomacy” but adding that “New Zealand is far from the Middle East, and I do not overestimate our influence over events there. We are not central to this region or this conflict.”

More broadly, the war against Iran launched by the United States and Israel holds the potential to reshape the Gulf, with both constructive and less positive possible impacts.

Images of Iranian strikes against airports, ports, hotels, military bases, and other structures threaten to tarnish the “safe haven” image that the Gulf states seek to project. In the short term, tourism numbers will inevitably suffer. However, the longer term attraction and dynamism of the Gulf will probably endure, as long as Iran’s strikes on the GCC can be halted or at least heavily constrained.

Moreover, higher oil prices resulting from the instability will help to boost government revenues and ease the economic pain. Facing financial pressures, Saudi Arabia had recently been scaling back and recalibrating some of its more ambitious “Vision 2030” projects such as the new futuristic linear city called “The Line.” The higher prices will be a useful cushion for the world’s biggest oil exporter, providing that it can get its oil to world markets.

This revenue aspect also is good news for New Zealand’s own exporters, which sell around NZ$3.3 billion (US$1.9 billion) of mainly food products to the Gulf each year, although shipping routes may need to be adjusted if the Strait of Hormuz remains off limits. This might involve the use of safer ports in Saudi Arabia and Oman and transhipment by road to the other GCC countries.

Indeed, in the longer term, the war may help to reunify the GCC states and, in particular, heal a rift that had been developing between Saudi Arabia and the UAE. It will not be lost on Gulf leaders that the six-member Gulf Cooperation Council was originally founded in 1981 as a security response to the Iran’s Islamic Revolution in 1979 and the subsequent outbreak of the Iran-Iraq War in 1980.

A drive for greater economic cooperation among the GCC states came later, leading to a customs union from 2003 that paved the way for trade deals such as New Zealand’s recently-agreed FTA.

In recent years and particularly over the last few months, relations between Saudi Arabia and the UAE had been strained, driven primarily by major foreign policy differences over approaches to countries including Yemen, Somalia, and Sudan – but also Israel.

While the UAE maintained normalized relations with Israel, established under the 2020 Abraham Accords, the war in Gaza and its aftermath – including the “12 Day War” with Iran last June – saw Saudi Arabia take a different path. 

In September 2025, Riyadh signed a new mutual defense pact with Pakistan – the Muslim world’s only nuclear power. On paper, the agreement states that an attack on either country is considered an attack on both. However, Pakistan is currently engaged in a separate war with Taliban-controlled Afghanistan, which Saudi Arabia has not participated in. Similarly, Pakistan has not yet joined the military campaign against Iran on Saudi Arabia’s behalf. Pakistan has a 900-kilometer-long border with Iran in its southwest.

Officials were also generally reticent about the pact during conversations with participants at February’s International Workshop for Leadership and Stability (IWLS) in Islamabad. I attended the IWLS as a guest of the organizers, the Institute for Strategic Studies, Research and Analysis (ISSRA) at Pakistan’s National Defense University.

Still, both the new Middle East war and the Afghanistan-Pakistan conflict are still in their early stages. Pakistan’s chief of defense forces met the Saudi defense minister over the weekend to discuss a joint response to the Gulf situation.

For New Zealand, the strategic implications of a potential new “arc of conflict” stretching from Saudi Arabia in the west to Pakistan in the east are worth exploring. 

Wellington’s relations with Islamabad are far more modest than its ties with New Delhi. While Pakistan maintains a High Commission in Wellington, New Zealand services Pakistan – the fifth most-populous country in the world – via the cross-accreditation of its High Commissioner to Sri Lanka. Colombo, the Sri Lankan capital, is some 3,000 kilometers away from Islamabad.

For New Zealand, there are no easy answers, but the option to take a greater role in dialogue, diplomacy and de-escalation efforts remains on the table for Wellington as the crisis in the Gulf expands. New Zealand is well thought of across the wider Middle East region, in part due to its compassionate response to the 2019 Christchurch mosque attacks, led by then-Prime Minister Jacinda Ardern.

While Wellington may be keen to concentrate its efforts on the Indo-Pacific, the Middle East is once again topping New Zealand’s foreign policy agenda.

It is a crisis. But it is also an opportunity.

This article was originally published by the Democracy Project, which aims to enhance New Zealand’s democracy and public life by promoting critical thinking, analysis, debate, and engagement in politics and society.