For decades, the standard playbook for emerging-market corporate finance was predictable: at the first sound of gunfire or maritime disruption, international investment committees pulled back, domestic boardrooms postponed expansion and cross-border mergers slowed.
Yet across the corporate corridors of Riyadh, Abu Dhabi and Dubai, that relationship is becoming considerably less straightforward.
Despite an intense, multi-front geopolitical crisis dominating headlines across the Middle East, corporate deal-making in the Middle East and North Africa showed striking resilience during the first half of 2026.
A total of 390 deals worth $46.7bn were completed during the period, according to EY’s latest MENA M&A report. That was below the 434 transactions worth $58.8bn recorded during the first half of 2025.
But the headline decline disguises a significant shift in momentum.
Deal value reached $25bn in the second quarter, more than double the $12.2bn recorded during the same period last year, even as geopolitical tensions intensified across the region.
The sequencing is particularly striking. Rather than producing a prolonged freeze in corporate decision-making, the uncertainty that weighed on activity earlier in the year was followed by a rapid release of transactions in the second quarter. The result was not a return to the exceptional aggregate levels of 2025, but a market demonstrating a greater willingness to transact through periods of instability.
The rebound does not mean that Gulf capital has become immune to political risk. Rather, it points to an increasingly important distinction between instability across the wider Middle East and the financial capacity of the Gulf’s principal economic centres.
The result is less a firewall against geopolitical risk than a financial shock absorber: large enough to keep transactions moving even when conditions elsewhere in the region deteriorate.
Large sovereign wealth funds, government-related entities and state-backed companies remain at the centre of that resilience. At the same time, governments in Saudi Arabia and the United Arab Emirates are pursuing economic diversification programmes whose investment requirements operate according to national development timelines rather than the regional political cycle.
The second-quarter recovery was heavily influenced by large transactions. Deals valued above $500mn accounted for nearly three-quarters of total deal value between March and June, according to EY.
Among them were Dubai Aerospace Enterprise’s roughly $7bn acquisition of Macquarie AirFinance and a roughly $6bn transaction involving Saudi Electronic Gaming Holding and Moonton.
But the significance of the numbers extends beyond a handful of large acquisitions.
Government-related entities remained prominent in domestic transactions, while Gulf investors continued to pursue substantial acquisitions overseas. Outbound M&A accounted for 119 transactions worth $25.5bn during the first half, with the UAE and Saudi Arabia the region’s most active outbound investors.
The pattern complicates the assumption that geopolitical instability would cause Gulf institutions to retreat from international markets and redirect capital exclusively towards their domestic economies.
Instead, they are doing both.
The distinction matters. Domestic transactions can help create larger national champions capable of supporting the Gulf’s vast investment programmes, while outbound acquisitions allow those same economies to import technology, expertise and market access.
At home, government-related entities and strategic investors continue to deploy capital into sectors tied to national development programmes. Overseas, Gulf institutions are searching for technology, transportation, financial services and energy-related assets capable of providing scale, expertise or international market access.
The principal engine behind that activity is the extraordinary concentration of capital in Gulf sovereign institutions.
Saudi Arabia’s Public Investment Fund, the Abu Dhabi Investment Authority and Mubadala are among the largest pools of state-controlled investment capital in the world. Their funding structures and investment horizons differ significantly from those of conventional private equity firms and corporate buyers.
They are not, as sometimes portrayed, simply enormous reserves of unleveraged cash. PIF, for example, uses government capital, retained investment returns, asset transfers and debt financing as part of its funding strategy.
But the size and diversity of those funding sources provide Gulf sovereign investors with considerable flexibility during periods when leveraged buyers elsewhere may become more cautious.
Energy revenues provide an additional financial cushion. Oil prices remain elevated by historical standards amid continued uncertainty over global supplies, supporting the fiscal position of the Gulf’s major hydrocarbon exporters even as crude prices fluctuate.
The second force driving transactions is less financial than political.
Saudi Arabia and the UAE have attached national strategic importance to transforming their economies beyond hydrocarbons.
Saudi Arabia’s Vision 2030 has entered a crucial period in which years of announcements, investments and institution-building increasingly have to translate into operating businesses and measurable economic activity. The UAE is pursuing its own industrial, technology and investment strategies.
Those programmes create investment timelines that cannot simply be suspended whenever geopolitical conditions deteriorate.
M&A offers governments and state-aligned companies a way of acquiring scale, technology, intellectual property and international distribution more quickly than developing those capabilities organically.
That is particularly relevant in sectors such as technology, manufacturing, transportation, financial services, power and energy, where Gulf governments are seeking to build companies capable of competing internationally.
Technology has emerged as an especially important target. Some of the largest transactions during the period reflected the growing determination of Saudi Arabia and the UAE to acquire digital capabilities and build domestic technology ecosystems.
Transportation and logistics have also become strategically important as disruptions to international shipping routes expose vulnerabilities in global supply chains.
For Gulf governments, investment in aviation, ports, freight networks, warehousing and emerging rail connections serves both commercial and strategic purposes. The region is seeking to reinforce its position as a trade and transportation hub connecting Asia, Europe and Africa while reducing exposure to individual maritime chokepoints.
In that sense, geopolitical disruption can itself alter corporate valuations. Assets that provide alternative transport capacity, warehousing, freight forwarding or redundancy in supply chains may become more strategically valuable when established routes are under pressure. The same instability that discourages investment in some assets can strengthen the rationale for acquiring others.
That calculation is already visible in some of the region’s largest infrastructure transactions.
Kuwait offers a striking example. In July, a consortium of international investors agreed a $16bn transaction involving the country’s oil pipeline network, one of the largest infrastructure deals in the region. The agreement came only weeks after the conflict with Iran had sharply increased perceptions of Gulf geopolitical risk, suggesting that investors were still prepared to commit substantial capital to strategic regional infrastructure despite the heightened uncertainty.
The same demand for scale is evident in the financial system supporting this investment.
Financial services form another part of the equation.
Banks across the GCC are operating alongside enormous infrastructure, real estate and industrial investment programmes requiring increasingly sophisticated financing capabilities. That creates incentives for institutions to achieve greater scale, deepen their balance sheets and expand their ability to finance large corporate and government-linked projects.
Scale is particularly important when individual projects require financing measured in billions rather than millions of dollars. Larger banks can underwrite bigger exposures, participate more effectively in syndicated financing and provide the corporate debt capacity required by governments seeking to turn ambitious development plans into physical infrastructure.
The development of the Gulf’s financial infrastructure has also changed how international investors assess regional risk.
For investors, this has encouraged a more granular approach. Increasingly, the question is not simply whether an asset is in the Middle East, but how directly it is exposed to what might be called kinetic risk: conflict, shipping disruption or political instability.
A logistics business exposed to a contested maritime route presents a different proposition from a financial or technology company operating within the institutional architecture of Abu Dhabi or Dubai.
An asset directly exposed to conflict, political instability or shipping disruption commands a very different risk assessment from a company headquartered in Riyadh, Abu Dhabi or Dubai with diversified revenues and established regulatory protections.
The development of international financial centres has reinforced that distinction.
Abu Dhabi Global Market directly applies English common law, while the Dubai International Financial Centre operates an independent common-law judicial and regulatory framework. Both have been designed in part to give international businesses legal institutions familiar to global investors and counterparties.
They cannot eliminate geopolitical risk. But they can reduce some of the legal and regulatory uncertainty historically associated with cross-border investment in emerging markets.
There are, however, important limits to the idea that the Gulf has constructed a financial shock absorber against the instability surrounding it.
One concerns valuation.
The growing prominence of sovereign wealth funds and government-related entities means some transactions are motivated by objectives extending beyond conventional financial returns. An acquisition can simultaneously be an investment, an industrial-policy instrument and a means of acquiring strategically important technology or expertise.
That does not make valuations artificial, but it can make conventional price discovery more difficult.
Investors must increasingly distinguish between transactions driven primarily by expected financial returns and those designed partly to advance national economic strategies.
There is also an important distinction between the resilience of Gulf capital and the confidence of international investors.
A market dominated by sovereign funds and government-related entities can continue producing large transactions even while foreign investment committees become more cautious. The durability of the current cycle will therefore depend partly on whether private international capital eventually follows the region’s state-backed investors or remains more sensitive to geopolitical risk.
A second vulnerability is the widening difference between the financing power of state-backed champions and the broader private sector.
Large sovereign institutions and government-related companies can access pools of capital and financing options unavailable to smaller privately owned businesses.
That risks creating a two-speed corporate economy: national champions capable of financing billion-dollar acquisitions alongside mid-sized private companies operating under much more conventional borrowing constraints.
For the Gulf’s diversification programmes to succeed over the longer term, private businesses will need access to sufficient capital to expand alongside state-backed companies rather than merely operate in their shadow.
The third challenge comes after a transaction closes.
Acquiring an international asset can prove easier than integrating it.
Companies expanding across the GCC already have to navigate different labour localisation requirements, data rules, tax systems and regulatory structures. International acquisitions add different corporate cultures, political environments and governance requirements.
The ability of increasingly ambitious Gulf buyers to convert acquisitions into efficiently integrated operating businesses will therefore become an important test of the region’s M&A strategy.
Geopolitics remains another constraint.
The first-half figures do not show that political risk has ceased to matter. International investors can still delay transactions, insurance and security costs can rise, supply chains can be disrupted and foreign boards can reassess exposure when regional tensions intensify.
What the numbers suggest instead is that the traditional relationship between geopolitical stress and capital deployment has weakened.
The Middle East recorded lower overall M&A value during the first half than it did a year earlier. Yet transaction values rebounded dramatically during the second quarter, at precisely the moment when conventional assumptions about emerging markets might have suggested that corporate activity should retreat.
Whether that momentum continues through the remainder of the year will depend on global financing conditions, energy prices, corporate earnings and, inevitably, the trajectory of regional conflict.
But the first half has already demonstrated something important about the changing structure of Gulf capitalism.
Capital has not become indifferent to geopolitical risk. The region has instead accumulated financial resources, institutions and economic ambitions sufficiently large that geopolitical turmoil no longer automatically brings corporate expansion to a halt.
For governments attempting to transform their economies according to fixed national development timelines, waiting for the Middle East to become politically tranquil is not much of a strategy.
Increasingly, Gulf deal-makers appear to have decided that they will have to build through the storm.