Gaza war shatters hopes for new Middle East

Washington’s vision for a Middle East in which economics and security bind Israel with its Arab neighbors has been shattered by the war in Gaza. [View in browser]( [Bloomberg]( Welcome to Balance of Power, bringing you the latest in global politics. If you haven’t yet, sign up [here](. New from Bloomberg: [Get the Year of Elections newsletter]( on the votes that matter to markets, business and policy, delivered periodically throughout the year. Washington’s vision for a Middle East in which economics and security bind Israel with its Arab neighbors is in tatters. Hamas’s attack on Israel and the subsequent offensive in Gaza are testing a long-held belief that hostility among Arab citizens toward Israel is irrelevant to their leaders’ choices about normalizing ties with the Jewish state. Pressure is [mounting on Arab nations]( to act in the face of more than 30,000 dead Palestinians, including thousands of women and children — numbers now cited by the United Nations and US President Joe Biden — and images of starving people. Saudi Crown Prince Mohammed Bin Salman has made clear that a [precondition to diplomatic rapprochement]( with Israel is “an irreversible path” toward a Palestinian state — anathema to Prime Minister Benjamin Netanyahu’s right-wing government. A deal announced last year for BP and the United Arab Emirates’ state oil firm to buy a $2 billion stake in Israel’s NewMed Energy was supposed to highlight burgeoning ties between the UAE and Israel. [It was suspended yesterday](. The war has undone “30 years of efforts to normalize the idea of peace with Israel in the Arab world,” Jordanian Foreign Minister Ayman Safadi said in an interview last month. Arab editorialists now wonder what it means to be America’s friend in a world where it’s being challenged by China — Beijing mediated a détente between Saudi Arabia and Iran last year — and defied daily by Israel over calls to pause the offensive. They question, too, why the US, Israel’s leading arms supplier, can’t ensure food deliveries by land to Gazans and instead must build a dock to bring in aid by sea that will take months to complete. For many, it all indicates the growing limits of US power. — [Sam Dagher]( Displaced Palestinians collect food from a street kitchen in Rafah, Gaza. Photographer: Ahmad Salem/Bloomberg Global Must Reads Many Russians have reason to feel the wartime economy [is working well for them]( in a setback for Western sanctions designed to pit the populace against President Vladimir Putin over the invasion of Ukraine. Ahead of this week’s presidential election, wages have soared by double digits, the ruble has stabilized, and poverty and unemployment are at record lows. Still, Russia’s budget deficit and dwindling government reserves pose long-term challenges. Dutch election winner Geert Wilders has dropped his bid to become prime minister, after months of coalition talks following the far-right politician’s shock win in November. On the cusp of becoming the Netherlands’ next leader, Wilders has instead been [forced to step aside]( by his prospective coalition partners, in a compromise to advance talks to form a cabinet. Donald Trump has talked about hedge fund titan John Paulson as Treasury secretary if he wins the November presidential election, and has held a series of meetings with potential cabinet picks, [sources say](. Other potential names in the mix include former US trade representative Robert Lighthizer, Susquehanna International Group founder Jeff Yass and Key Square Group founder Scott Bessent. TikTok has switched its lobbying focus to the Senate after the House passed a measure yesterday [to ban the short-video app]( used by 170 million Americans unless its Chinese owner divests it. While Biden has said he will sign the bill, Congress has a dismal record in turning members’ denunciations of perceived tech abuses into law. Recent flubs by British Prime Minister Rishi Sunak and grim polling for his Conservatives have [triggered renewed chatter]( among cabinet ministers that the ruling party might have to replace him before a UK election expected this year, sources tell Alex Wickham and Kitty Donaldson. While no rivals appear to have enough support to mount a challenge, the fact members of Sunak’s government are even broaching the topic suggests a period of peril ahead. European Union ambassadors agreed in principle to provide $5.5 billion in military support for Ukraine, after member states [reached a compromise]( to allow weapons purchases from outside the bloc. Catalonia’s regional government called a snap election almost a year ahead of time, [setting the stage]( for an unexpected test for Spanish Prime Minister Pedro Sanchez. Officials in a Chinese city near Beijing apologized after security personnel prevented a state media journalist from covering a fatal explosion, an incident that [underscores the difficulty of reporting]( in the world’s second-largest economy. Washington Dispatch Joe Biden will campaign in Michigan today on a quick tour that also took him to neighboring Wisconsin. Both are battleground states essential to his reelection hopes. The president and his circle continue to present legislative accomplishments, including the Chips and Science Act and Inflation Reduction Act, as the dawn of an industrial and clean energy boom. “Today, we’re making decisions to transform your lives for decades to come,” Biden said yesterday in Milwaukee, highlighting his administration’s investments into communities and job creation. Yet other issues keep intruding on that message. On a trip to Kentucky yesterday to visit a plant that makes nanomaterials for electric vehicle batteries, Treasury Secretary Janet Yellen told reporters it was “unlikely” that market interest rates would return to levels that prevailed before the coronavirus pandemic. While voters’ economic concerns continue to confront Democrats, Vice President Kamala Harris will highlight an issue that has put Republicans on the defensive: abortion rights. In Minneapolis today, she [plans to tour a health center]( where abortions are performed. One thing to watch today: Weekly initial jobless claims are expected to increase. [Sign up for the Washington Edition newsletter]( for more from the US capital and watch Balance of Power at 5pm ET weekdays on Bloomberg Television. Chart of the Day Hong Kong has the highest proportion of employers pressuring staff to work in the office regularly compared with competing hubs in Asia, [according to a survey]( by recruitment firm Morgan McKinley. More than 90% of firms in the city are urging their workers to increase their office presence, against 56% of employers doing so globally, the survey showed. And Finally Istvan Tiborcz says he’s [on a mission to help revamp Budapest]( and allow the Hungarian capital to catch up with cities such as Vienna in terms of higher-end accommodation. Prime Minister Viktor Orban’s son-in-law has emerged as Hungary’s most prominent investor in the tourism industry, with his restoration of buildings such as the iconic Gellert spa hotel on the Buda side of the Danube and Hotel Dorothea on the Pest side. But to Orban opponents, including Budapest’s mayor, Tiborcz’s rise illustrates how politics and business have become intrinsically linked under a leader the EU has accused of fostering a system of cronyism. The Hotel Gellert on March 8. 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