**Saudi Arabia continues to condition any normalization with Israel on a credible, irreversible pathway to Palestinian statehood, including East Jerusalem as capital, a stance reaffirmed in recent official statements despite U.S. diplomatic pressure.** The Gaza conflict and subsequent regional developments have intensified this requirement, with Riyadh citing hostile domestic public opinion, Israeli actions in the West Bank and beyond, and a reassessment of risks versus benefits as key reasons normalization remains off the agenda. Saudi sources describe the process as stalled, noting diminished shared threat perceptions with Iran and preference for U.S. security guarantees without linking them directly to Israeli recognition. Israeli coalition dynamics and lack of movement on Palestinian concessions further reduce near-term prospects. With limited time remaining before 2027, these entrenched political and diplomatic barriers underpin trader expectations that no agreement will occur.