Key Takeaways
- • Investment banking revenues across the Gulf have contracted 14% year-to-date despite a strong Q1, driven by regional conflict involving the US, Israel, and Iran that has disrupted M&A, IPO pipelines, and sovereign-backed transactions.
- • The slowdown eliminates expectations that investment banking fees would surpass $1 billion for the first time in nearly two decades, with large-scale listings including Emirates Global Aluminium indefinitely postponed.
- • Tens of billions of dollars in cross-border transactions remain pending completion as issuers, investors, and sovereign wealth funds reassess valuations and delay capital commitments pending greater geopolitical stability.
- • Sovereign wealth funds—traditionally key drivers of megadeals—are reallocating capital priorities due to fiscal pressures, increased defense spending, and heightened risk perception, with pricing expectations and execution timelines materially shifted.
- • Market participants characterize the current environment as dominated by delays rather than cancellations, with advisers expecting dealflow momentum unlikely to fully rebound before 2027 at earliest.
Summary
The Gulf's investment banking market has experienced a sharp and unexpected reversal in 2026 following the outbreak of regional conflict involving the US, Israel, and Iran. What had been positioned as a record year for dealmaking—supported by robust sovereign wealth fund activity and an exceptionally strong IPO pipeline—has stalled significantly. Investment banking revenues in the region have declined approximately 14% year-to-date despite momentum through the first quarter, indicating the severity of the disruption.
The most visible impact manifests in the postponement of major capital markets transactions that had been expected to define the region's dealmaking landscape. Emirates Global Aluminium, positioned as one of the Gulf's largest IPOs and a critical test of domestic capital market depth, has been pushed back indefinitely. Additional strategic listings tied to Dubai Holding and broader sovereign asset monetization programs have similarly been delayed. IPO activity, which had ranked among the most active globally, has contracted sharply outside smaller, domestically focused offerings. Simultaneously, tens of billions of dollars in cross-border transactions remain suspended as parties await improved market conditions.
Mergers and acquisitions activity has proven particularly vulnerable to the geopolitical disruption. While equity markets in the UAE remain depressed relative to pre-conflict levels, the slowdown extends beyond equity offerings to encompass strategic asset sales and large-scale transactions. The temporary ceasefire that briefly restored some investor confidence has been undermined by renewed attacks and persistent regional uncertainty, maintaining subdued dealflow conditions.
Sovereign wealth funds, traditionally catalysts for major transactions, have begun reassessing capital allocations as fiscal priorities shift toward increased defense spending and portfolio risk management. Market participants note that while appetite for strategic investments remains, pricing expectations and execution timelines have shifted materially. Some large transactions linked to national energy champions and sovereign investors continue progressing, though these deals face heightened scrutiny given evolving capital costs and elevated risk perceptions.
Advisers across the region describe a market characterized primarily by deferrals rather than cancellations, with issuers, investors, and sovereign entities effectively pausing active deal pipelines pending clearer geopolitical visibility. A full rebound in dealmaking momentum is not anticipated until 2027, significantly delaying the investment banking revenue targets that had seemed attainable just months prior.
The most visible impact manifests in the postponement of major capital markets transactions that had been expected to define the region's dealmaking landscape. Emirates Global Aluminium, positioned as one of the Gulf's largest IPOs and a critical test of domestic capital market depth, has been pushed back indefinitely. Additional strategic listings tied to Dubai Holding and broader sovereign asset monetization programs have similarly been delayed. IPO activity, which had ranked among the most active globally, has contracted sharply outside smaller, domestically focused offerings. Simultaneously, tens of billions of dollars in cross-border transactions remain suspended as parties await improved market conditions.
Mergers and acquisitions activity has proven particularly vulnerable to the geopolitical disruption. While equity markets in the UAE remain depressed relative to pre-conflict levels, the slowdown extends beyond equity offerings to encompass strategic asset sales and large-scale transactions. The temporary ceasefire that briefly restored some investor confidence has been undermined by renewed attacks and persistent regional uncertainty, maintaining subdued dealflow conditions.
Sovereign wealth funds, traditionally catalysts for major transactions, have begun reassessing capital allocations as fiscal priorities shift toward increased defense spending and portfolio risk management. Market participants note that while appetite for strategic investments remains, pricing expectations and execution timelines have shifted materially. Some large transactions linked to national energy champions and sovereign investors continue progressing, though these deals face heightened scrutiny given evolving capital costs and elevated risk perceptions.
Advisers across the region describe a market characterized primarily by deferrals rather than cancellations, with issuers, investors, and sovereign entities effectively pausing active deal pipelines pending clearer geopolitical visibility. A full rebound in dealmaking momentum is not anticipated until 2027, significantly delaying the investment banking revenue targets that had seemed attainable just months prior.
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