Saudi Arabia continues to condition any normalization with Israel on a credible pathway to Palestinian statehood with East Jerusalem as its capital, a stance reaffirmed by Riyadh through mid-2026 amid unresolved tensions from the Gaza conflict and regional instability. This longstanding requirement, reinforced by domestic public opinion and assessments that risks now outweigh benefits, has kept formal talks stalled since pre-2023 momentum faded. Recent diplomatic moves, including a July 2026 U.S.-Saudi civilian nuclear cooperation agreement and Saudi defense pacts with Turkey and Pakistan, have advanced bilateral ties without linking them to Israeli recognition. Traders reflect this entrenched barrier in the 91.5% implied probability against a deal before 2027, given the short timeline and absence of catalysts capable of shifting priorities or resolving core Palestinian conditions.