Dr. Hamad Kasasbeh

For years, Israeli settlement expansion has continued under a high ceiling of international condemnation but a low cost of deterrence. The problem has not been the absence of international positions, but the limited political and economic price attached to them. This is why British and European moves to restrict trade with settlement products matter beyond the value of the trade itself: they may mark the beginning of a shift from registering objection to influencing the calculations that allow expansion to continue.

A boycott of settlement products alone will not disrupt the Israeli economy; the volume of this trade is limited. Its significance lies instead in the path it can open. If settlement-related activity faces reduced access to markets, finance and investment, and if restrictions extend to the companies, banks and insurers that finance or service it, the cost begins to move from a narrow set of exports to the broader economic environment that supports the activity.

This matters more because Europe is a major economic partner for Israel. Companies and investors do not always wait for a formal penalty before changing course; it may be enough for ties to settlements to create risks to market access, financing or reputation. As risk rises, expected returns fall and capital becomes more cautious. That is the essence of economic deterrence: making settlement-related activity more costly, more uncertain and less attractive to investment.

Yet European economic power is not sufficient on its own. The United States remains the external actor with the greatest capacity to influence Israeli decision-making, while also being a principal strategic partner of Arab states. So far, however, that leverage has not been translated into a clear policy that raises the cost of continued expansion. If Washington regards a two-state solution and Middle East stability as shared interests, using its influence to curb settlement growth should be part of protecting those interests.

This raises a broader question about the substance of the Arab–American partnership. These relationships extend from security and defense to trade, investment, energy and technology. What is the value of a partnership of this scale if an issue that threatens the two-state solution and increases the risk of regional instability remains beyond its effective reach? A clearer American position on settlement expansion would not serve Palestinians alone; it would also protect the foundations of stability on which American and Arab interests depend.

Responsibility therefore also shifts to the Arab side. An Arab position confined to condemnation is no longer proportionate to either the scale of the risk or the tools available. Settlement expansion does not merely alter the Palestinian map; it narrows the possibility of a viable Palestinian state, weakens the prospects for a political settlement and opens the door to a longer and more costly conflict. Protecting the two-state solution is therefore an Arab interest tied directly to security, investment, growth and regional stability.

This is why an official Arab position at summit level is needed—not to repeat familiar declarations, but to adopt a common framework for action. It could begin with banning settlement products, tightening rules of origin, reviewing dealings with companies linked to settlement activity, and using public procurement and investment more consistently. Most importantly, it should carry a collective message to Washington that preserving the two-state solution is part of preserving regional stability.

The Arab world does not lack instruments. It has large markets, sovereign wealth funds, major investments, regional projects and strategic relationships with leading powers. The challenge is not possession of these assets, but converting them into organized influence. If coordinated with European action and linked to a clear Arab dialogue with the United States, Arab economic weight can become part of the equation of influence rather than financial power standing outside it.

In the end, no single boycott will stop settlement expansion, and no single tool will overturn a pattern entrenched over decades. What can change is the rule that has governed this issue for too long: expansion continues while its cost remains limited. Europe has begun to mobilize market tools, the United States holds the greatest leverage, and Arab states possess substantial economic and political weight. As settlement expansion continues to erode the prospects for a two-state solution, the question becomes more urgent: what is the value of the Arab–American partnership, and of Arab economic weight, if neither is used to protect regional stability before the cost of rescuing it becomes far greater?