What Role Do Transaction Fees Play in Arbitrage Profitability?

Transaction fees, particularly network gas fees, represent a cost for the arbitrageur. The profit from the price difference must exceed the total transaction fees (buying, redeeming/minting, and selling) for the arbitrage to be profitable.

High gas fees can narrow the profitable arbitrage window or make small deviations from the peg not worth exploiting, thus slowing the peg's restoration.