Admission of stupidity by American in Middle East capital (4)
I believe the answer is:
doha
'middle east capital' is the definition.
(capital of Qatar)
'admission of stupidity by american' is the wordplay.
'admission of stupidity' becomes 'doh' (as in Homer Simpson).
'by' says to put letters next to each other.
'american' becomes 'a' (common abbreviation - e.g. in organisation names).
'doh'+'a'='DOHA'
'in' is the link.
(Other definitions for doha that I've seen before include "Gulf resort" , "Trade round" , "Capital of Qatar" .)