Diplomatic normalization with Israel remains closely tied to progress on a two-state solution and regional stability, with trader consensus assigning low probabilities to new recognitions by late June. Saudi Arabia continues to condition any move on Palestinian statehood with East Jerusalem as capital, while Lebanon and several other Arab or OIC members face domestic political and security constraints that limit near-term shifts. Recent restorations of ties, such as those reestablished in late 2025, have not yet produced broader momentum, and the post-Gaza environment has reinforced linkage between bilateral deals and multilateral diplomatic frameworks. Any breakthrough would likely require coordinated U.S. engagement or a verifiable de-escalation in active conflicts to alter current assessments before the resolution window closes.