The Middle East’s Funding Momentum is Likely to Strengthen in 2026
After defying global funding headwinds in 2025, the Middle East enters 2026 with signs of M&A strength, IPO recovery, and rising FDI.
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[Image source: Chetan Jha/MITSMR Middle East]
Despite global uncertainty in 2025, the Middle East made significant progress in AI, policy, and infrastructure. Geopolitical tensions and unpredictable oil prices did not hinder its momentum, resulting in strong growth in mergers and acquisitions (M&As), initial public offerings (IPOs), startups, and foreign direct investment (FDI).
With the World Bank projecting 4.5 percent economic growth for the GCC in 2026, market participants expect funding momentum to strengthen further.
Robust Mergers and Acquisitions
As global M&As slowed in 2025, the Middle East saw an increase in transaction volume and deal size compared to the previous year.
The Middle East and North Africa (MENA) region saw M&A activity demonstrate resilience, with 649 deals valued at $69.1 billion in the first nine months of 2025. Notably, the GCC alone accounted for $65.9 billion. In the first half of 2025, 271 M&A deals were recorded in the region, a 19 percent Y-o-Y increase, with technology, media, and telecommunications (TMT) emerging as key pillars alongside energy.
Looking ahead, optimism remains strong. A survey of nearly 400 companies by Citizens Financial found that 58 percent of executives expect M&A volumes to rise, particularly among mid-sized firms.
“As financing conditions stabilize and valuation gaps narrow, activity in the middle market is expected to accelerate,” read a recent analysis by The Bonadio Group.
Recovery of Initial Public Offering
The Middle East’s IPO landscape experienced a lull in 2025, delivering its weakest performance since 2020. Hit by lower oil prices, geopolitical risks, and weak post-listing performances, the region’s firms raised $7.1 billion from 61 listings last year, compared to $13.1 billion in 2024 and $2.2 billion in 2020.
During this period, Saudi Arabia remained the primary driver of IPO activity, with 13 listings.
Abu Dhabi Securities Exchange and Dubai Financial Market are expected to have nine to 12 IPOs in the first half of 2026, according to Vijay Valecha, Chief Investment Officer at Century Financial.
“We expect continued momentum across M&A and IPO activity, deeper international fund formation, and further integration of global investors into the ecosystem,” Philip Bahosy, CEO and founder of Magnitt, said in a report.
Startup Funding to Defy Global Caution
Contrary to global sentiment, the Middle East delivered a strong performance, attracting $3.8 billion across 688 deals in 2025, a 74 percent Y-o-Y increase.
As countries underwent an extended market correction, MENA’s startup ecosystem experienced positive signs of recovery and growth.
Early signals from 2026 suggest the momentum is holding. Over $49 million was raised within the first 15 days of the year, according to the MENA Startup Investments and Acquisitions Report (January 4–11, 2026).
With capital availability improving and competition among investors increasing, startup valuations in the GCC are trending upward. This pattern is expected to continue through 2026, particularly in fintech, AI, climate tech, logistics, and enterprise software.
Vying for FDIs
Foreign Direct Investment (FDI) plays a crucial role in the Middle East’s funding landscape. It is primarily concentrated in the UAE and Saudi Arabia, driven by efforts to diversify economies, develop infrastructure, and implement supportive new investment laws. Significant investments are also being made in technology and renewable energy, with business services and real estate emerging as key sectors that attract this investment.
Between 2023 and 2025, the UAE and Saudi Arabia recorded 642 and 594 announced inward FDI projects, respectively, according to GlobalData. Investment has been robust in renewable and alternative power (23 percent), tourism (22 percent), and electronics (21 percent).
Internationally friendly legal and regulatory frameworks in the UAE free zones attract global capital. The US, UK, and India are the top investors.
“The strength and resilience of Dubai’s economy continues to inspire confidence among global investors in its ability to reimagine the future and unlock emerging global technological trends and sustainable sectors,” said H.H. Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai.
In the first half of 2025 alone, Dubai attracted 643 Greenfield FDI projects worth $11 billion, setting a new record.
Favorable external conditions are expected in 2026, as governments continue to prioritize FDI. A Norton Rose Fulbright report said, “Foreign direct investment activity may also be further stoked by the ongoing commitments of some GCC states to privatize many of their state-held assets, whether in whole or in part.”
Overall, in 2026, as global capital slowly returns to risk markets, the Middle East can be expected to continue its upward trajectory, with resilience evolving into sustained funding growth.
