U.S. Defense contractors are looking at a potentially sharp downturn in arms sales to key Arab states like Saudi Arabia and Egypt, for decades their best foreign customers, because of the Obama administration's effort to forge a new relationship with Iran and to punish the Egyptian military for usurping their country's first Islamist president. The Saudis are reported to be seeking to buy five German Type-209 submarines, similar to those acquired by Israel and capable of launching nuclear-tipped cruise missiles, for $3.4 billion, with a long-term program of up to 25 boats in a $16.03 billion deal. Germany's Bild newspaper,...