Delayed, not derailed – MENA M&A through regional instability

Geopolitical tensions disrupted a market in full flow, pausing one of the region's strongest M&A runs. 

The MENA dealmaking environment faced new challenges at the end of February 2026, when the conflict involving Iran, Israel and the United States disrupted trade and energy flows through the Gulf. The market registered the shift interrupting one of the strongest periods of momentum growth the region experienced – with 390 completed transactions ($46.7bn) in H1 2026 against 434 ($58.8bn) in H1 2025, representing a decline of c.10% and 21% in volume and value respectively. The move marks a reversion from the strong growth registered between 2023 and 2025, when MENA transactions climbed from c.680 transactions to almost 900 with values from $86bn to $106, a growth of c.30% and 23% respectively.

The first-order impact was slowing execution, with international investors struggling with investment committees raising concerns during active conflict. Consequently, ongoing processes were extended or postponed, where not yet commenced, with due diligence challenged by airspace closures (with more than 1,500 flights disrupted), blocking teams travelling to site visits and technical workstreams. The impact was visible across several live executions, with active disposal processes across digital infrastructure, water utilities, and district cooling significantly extending timelines.

Deal pricing remained relatively unaffected, with buyers beginning to underwrite geopolitical risk premium, raising required returns and reducing prices, contrasted by vendors biding time and holding to their valuation assessments – ultimately seeing no fundamental shift. Case in point is the July Kuwait Petroleum Corporation pipeline network $16bn lease-and-leaseback agreement with a consortium including Blackstone, Brookfield and KKR, who acquired a 49% stake, marking the largest foreign direct investment in Kuwait's history – pricing the deal at returns more competitive vs precedents in KSA and UAE.

Foreign investors remained active, with leading international financial sponsors driving transaction activity and focusing especially on KSA. Notably, in July, Brookfield held a c.$2bn first close on a PIF-anchored Middle East fund, while I Squared Capital signed an MoU with PIF committing to deploy up to $2bn into digital infrastructure and district cooling.

The impact was uneven across sectors, with infrastructure and utilities holding up best, supported by government spending on national development programs and retained high-quality credit ratings. Technology and digital infrastructure continued to attract capital throughout the most volatile months, with investor focus on AI and enterprise digitalization. The sectors under most pressure were those dependent on physical access or discretionary demand: hospitality, consumer, aviation and shipping-exposed logistics.

Outbound activity held up, with c.120 transactions worth c.$26bn in H1 2026 (broadly in line with the levels of H1 2025), with most transactions already in the making before February 2026. Landmark transactions included Dubai Aerospace Enterprise's $7bn acquisition of Macquarie AirFinance. A shift in this trend is materializing however, with investment focus moving inward, as government-related entities redirect capital deploying regionally to sustain market liquidity and support local businesses.

A resilient market – with Q4 being the real test of its recovery. 

The recent instability did not cause fundamental stress to credit markets, with GCC banks lending through the first half of the year, backed by strong regional liquidity, as well as central banks actively supporting liquidity which guarantee confidence.

Activity is poised for a long-term recovery, driven by strong structural fundamentals still in place: (i) Sovereign wealth funds and government-related entities investing in line with long-term national plans rather than market cycles; (ii) Diversification programs with committed budgets; (iii) Deepening capital markets; (iv) A broad infrastructure agenda including food security, digital infrastructure and the protection of critical assets.

Overall, the region has shown it can absorb a shock of this scale and, as transactions paused through the first half return to market, Q4 2026 will be the real test of whether the delayed pipeline converts and volumes revert to 2023-2025 trends.