Saudi Arabia has maintained its long-standing position that diplomatic normalization with Israel requires meaningful progress toward an independent Palestinian state, including East Jerusalem as its capital or at least an irreversible pathway to statehood. This stance, reiterated publicly by Saudi officials in 2025 and 2026, has not shifted despite U.S. efforts, including linkage of a July 2026 civilian nuclear cooperation agreement to normalization. Regional developments, including the aftermath of the Israel-Hamas conflict, elevated domestic opposition within Saudi Arabia, and evolving security calculations around Iran and Gulf dynamics, have further reduced incentives. Traders view these structural barriers and the absence of recent breakthroughs as making a deal before the December 31, 2026, resolution deadline highly improbable.