This study examines likely challenges to U.S. interests in the Persian Gulf, identifies key uncertainties and trends, and assesses the implications of those trends for the United States. The authors find there is a declining threat from Iraq and Iran, with shifting military balances and weakness, although weapons of mass destruction (WMD) remain a concern. Internal threats to regional partners include a fraying social contract-unemployment is growing and governments are less able to provide services. There is potential for unrest and sudden large refugee flows. Economic problems contribute to limited momentum for reform, and the U.S. presence and policies may exacerbate problems. Possibilities for dramatic regime change in Iraq or Iran are weighed. The authors conclude that while many trends in the region are positive, daunting problems remain. The United States should focus less on the conventional military threat and more on the risk of WMD and possible instability or domestic unrest among several Gulf partners, and attempt to minimize any deleterious effects of the U.S. military presence in the region. (The analysis was completed before the September 11, 2001 terrorist attacks.).