The New York Times notes that a year ago, Saudi Arabia was preparing to recognize Israel in a normalization deal that would have radically reshaped the Middle East and further isolated Iran and its allies while doing nothing to advance Palestinian statehood.

“Now, that deal is further away than ever, even after the killing of Hamas leader Yahya Sinwar, which the United States and others saw as a potential opening for a peace deal. Instead, Saudi Arabia is warming relations with its traditional arch-enemy, Iran, while insisting that any diplomatic agreement now depends on Israel accepting a Palestinian state, a notable shift for the kingdom,” the report said.

A diplomatic thaw is underway in the Middle East, but not the one envisioned by Israeli Prime Minister Benjamin Netanyahu, who continues to say his government can reach an agreement with Riyadh. This month, Gulf Arab foreign ministers met as a group for the first time with their Iranian counterparts. The fragile rapprochement at an early stage will only thaw centuries of sectarian animosity, but it represents a sharp turn in a region where the rivalry between Riyadh and Tehran has engulfed the region in bloodshed for decades.

Tehran’s efforts continued after that, with Iranian Foreign Minister Abbas Araghchi visiting Saudi Arabia before heading to other countries in the region, including Iraq and Oman, in an attempt to ease tensions. He also visited Jordan before traveling to Egypt and Turkey. The visit to Egypt was the first by an Iranian foreign minister in 12 years, according to Iranian media.

"In the region, we now have a common complaint about the danger of the spread of war, the wars in Gaza and Lebanon and the displaced," Mr. Araghchi said on Friday, when he landed in Istanbul.

While Mr. Netanyahu continued to reject the establishment of a Palestinian state, Saudi officials turned to newspapers and public speeches to put the two-state solution on the negotiating table. But what changed? Images began pouring in from Gaza of children buried alive in rubble, mothers weeping over their dead children, and Palestinians starving because Israel blocked aid from entering the region—all of which made it impossible for the Saudi leadership to ignore the issue of Palestinian statehood.

“What Gaza has done is to hinder any Israeli integration into the region,” said Ali Shihabi, a Saudi businessman close to the royal family who sits on the advisory board of Neom, the futuristic city that is the pet project of Crown Prince Mohammed bin Salman, the future ruler of the kingdom. “Saudi Arabia sees any connection with Israel as toxic since Gaza, unless the Israelis change their positions and show a real commitment to a Palestinian state, which they refuse to do.”

For now, Saudi Arabia and its Gulf partners remain skeptical of the sincerity of Iran’s diplomatic overtures. While two of Iran’s proxies, Hamas and Hezbollah, have been hit by Israeli strikes, Iran continues to arm and support its third ally, the Houthis in Yemen, who have attacked Saudi Arabia.

But “as long as the Iranians are extending a helping hand to Riyadh, the Saudi leadership will take it,” Mr. Shihabi said, adding that if Iran is serious, “this will be a real reorganization of the Middle East.”

Saudi Arabia and Iran have long competed for regional dominance, a competition shaped by the competing branches of Islam each country professes.

The war on Gaza has been raging for more than a year, after Hamas launched a bold and bloody attack on October 7, 2023, which resulted in the killing of about 1,200 Israelis, including at least 311 soldiers on duty, according to official Israeli reports, and the kidnapping of more than 200 others, while more than 42,000 Palestinians were killed, most of them women and children.

While palace insiders like Shihabi acknowledge that Saudi Arabia is not a democracy, Prince Mohammed is sensitive to public opinion, which has become more hardline toward Israel over the past year. The Gulf region has one of the world’s youngest populations, with the median age of Saudis reaching 29 in 2022. And many of its citizens are transfixed by the endless stream of horrific images coming out of Gaza on social media, changing many of their previously positive, or at least ambivalent, attitudes toward the deal with Israel.

In the months leading up to October 7, Saudi Arabia had been planning a deal with Israel that would give Riyadh an expanded defense pact with the United States and support for a civilian nuclear program in exchange for normalizing relations. While some other Gulf states opened diplomatic relations with Israel in 2020 in a deal known as the Abraham Accords, they have not used their leverage to push Israel to create and recognize a Palestinian state.

While Riyadh has long been a strong advocate of a two-state solution, that goal has become less of a foreign policy priority in recent years as the crown prince has consolidated his power and shaped the country’s regional and domestic policies. In talks last year to normalize relations with Israel, Palestinian statehood was not raised as a condition. Instead, Riyadh demanded that Israel allow the Palestinian Authority—which governs the West Bank—to expand its territorial control and power, according to Shihabi and Arab diplomats familiar with the talks.

But the situation in Gaza has turned this contradiction upside down.

In his first public comments calling for a Palestinian state, Crown Prince Mohammed bin Salman was clear about Riyadh’s new demands.

“The Kingdom will not cease its tireless efforts to establish an independent Palestinian state with East Jerusalem as its capital, and we affirm that the Kingdom will not establish diplomatic relations with Israel without that,” the Crown Prince said on September 18 before his Supreme Advisory Council, in a speech resembling the US State of the Union address.

The Abraham Accords have been criticized for not delivering the regional peace promised by former President Donald Trump, whose administration brokered the deal. None of the Arab countries that signed the accords have fought a war with Israel in decades (Jordan and Egypt being the only ones), and the deal does not include Iran and Syria, which are in active conflict with Israel.

The historic meeting between Iran and the Gulf states this month came a day after Tehran fired 180 ballistic missiles at Israel. The attack was in retaliation for the killing of Hezbollah leader Hassan Nasrallah last month and the July 31 assassination in Tehran of Hamas political chief Ismail Haniyeh, two key Iranian allies.

Observers wonder whether Iran is now more eager to thaw relations with the Gulf because of Israeli operations that have killed most of Hezbollah’s top leaders in recent weeks. The Lebanese militia has long been Iran’s most powerful Arab ally and proxy, long feared by Israel and a linchpin of Tehran’s efforts to project power across the Middle East. It has also provided Iran with a bulwark against Israel. Without Hezbollah, Tehran is severely weakened.

The war on Gaza has also forced countries that signed the Abraham Accords to begin calling for the establishment of a Palestinian state, perhaps because they are concerned about public opinion at home.

While the United Arab Emirates, the second most powerful player in the Gulf, has maintained ties with Israel over the past year, the relationship has come under increasing strain.

“The UAE is not prepared to support the day after the war in Gaza without the establishment of a Palestinian state,” UAE Foreign Minister Sheikh Abdullah bin Zayed said last month, referring to Israeli demands that the UAE bear the burden of rebuilding Gaza after the war ends.

While Netanyahu continues to claim that a massive deal is in the works with Riyadh, Saudi officials have pushed back, highlighting the growing rift between their countries.

“The Abraham Accords were formal; there was nothing substantive about them when it came to a real, lasting regional peace agreement,” Al-Shahabi said, according to the newspaper. “Many of the countries that signed them did so because they saw Israel as a path to influence in Washington.”

“But we now see that the United States has no power or influence over Israel — to an insulting degree,” he added, “and that the Israelis have no intention of creating a Palestinian state.”