Iran war threatens Middle East as source of global capital
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Illustration: Brendan Lynch/Axios
The Iran war has stopped oil and fertilizer flows through the Strait of Hormuz, but it hasn't stopped Middle Eastern money flows. Yet.
The big picture: Countries like UAE and Saudi Arabia have successfully positioned themselves as global financial centers, while regional sovereign wealth funds have become major global investors.
- For example, Middle Eastern sovereigns last year invested $42.5 billion in direct venture capital — up from $13.3 billion in 2024, per PitchBook.
- And that doesn't account for the billions more that flowed indirectly via commitments to outside venture capital funds. Plus a ton of private equity dealmaking, both direct and indirect.
Driving the news: Iran yesterday threatened to target banks with ties to the U.S. or Israel, prompting many to vacate offices in places like Dubai and Doha.
- Sources say that employees at other investment firms already were working from home or had temporarily relocated.
Zoom in: So far the disruptions don't appear to have negatively dealmaking.
- Just yesterday we learned about a Saudi group offering to buy London-listed oil producer Capricorn Energy and a Qatari fund bidding for pizza chain Papa Johns.
- Two U.S. private fund placement agents tell Axios that they've not yet heard about commitment delays or missed capital calls by Middle Eastern institutions. Another notes that the largest of these groups have full-time staff outside the region, thus reducing possible disruptions.
Yes, but: It's been less than two weeks since the war began, and the end game is murky.
- Some Middle Eastern countries may instruct their wealth funds to slow new disbursements, given their increased domestic security costs and drastically reduced export revenue.
- Remote work is no longer the same disruption as it was in 2020, but it still can cause unexpected complications — particularly if air travel is restricted.
- And that doesn't even begin to address the potential reputational damage for countries that had pitched themselves as safe and stable places to do business.
The bottom line: The Middle East has become a critical source of global capital, including for large AI companies and projects. It's no longer a sure bet.
