Iran war tests Gulf dealmaking as foreign investors assess risks

A multibillion-dollar pipeline sale in Kuwait has emerged as one of the early signs that the Gulf’s dealmaking machine is taking a hit from the US-Israel-Iran war.

On March 17, Reuters reported that Australian infrastructure investor Macquarie had pulled out of bidding for a stake in Kuwait’s oil pipeline network worth up to $7 billion, citing uncertainty caused by the conflict. 

The reported move would mark one of the first known cases of an investor stepping away from a major Gulf transaction since the war erupted on Feb. 28. More broadly, the development raises fresh questions about the foreign investment outlook across a region where dealmaking has boomed in recent years. 

How large an investment impact this war will have remains unclear. According to Tim Callen, a visiting fellow at the Arab Gulf States Institute and former International Monetary Fund mission chief for Saudi Arabia, the trajectory of foreign direct investment into the Gulf Cooperation Council countries will largely depend on how long the conflict continues and whether investors believe similar tensions could reemerge after the war ends.

“Given that this conflict will have certainly elevated the risk profile of the GCC to foreign investors, we can expect a lower level of FDI going forward than would otherwise have been the case, but by how much is anyone’s guess at this stage,” Callen told Al-Monitor.

Some dealmaking jitters, however, were unavoidable given the magnitude of the war, which has left Gulf states and their infrastructure exposed to retaliatory strikes by Iran. The crisis has already delivered a reputational hit to a region that has spent years positioning itself as a stable destination for global wealth and talent.

But investors also continue pursuing opportunities in what remains a strategically important market and is home to sovereign wealth funds boasting trillions in combined assets. Should foreign capital retreat, these state investors may increasingly step in to drive domestic dealmaking.

Early caution

The Kuwait transaction had attracted interest from several major global investors before Macquarie exited, and companies are still reportedly pushing forward with the deal despite the volatility. Macquarie has yet to publicly comment on the transaction itself, but in a statement to Reuters reaffirmed their commitment to the region and pursuing long‑term investment opportunities, including in Kuwait. Still, the episode underlines that new uncertainty surrounding valuations, financing and execution risks is set to affect negotiations and timelines.

From the start, the conflict was expected to influence regional investment activity. Missile and drone attacks quickly disrupted Gulf travel, while Iran has directly threatened to strike banks and financial firms. That has prompted institutions ranging from Citi to HSBC to shutter local offices and evacuate staff.

The Dubai International Financial Center, a dealmaking hub featuring thousands of registered firms, was hit by a drone attack on March 13.

Crucially, the outlook for US investment collaboration will be a key storyline to watch. Last year, Gulf powers made huge financial pledges to back the Trump administration’s economic agenda, including deeper technology cooperation.

Pressing ahead

Despite turbulence, several global investors have publicly reaffirmed their long-term commitments to the region. On March 3, Brookfield Asset Management said the war had not altered its plans to build data centers with Qatar or its broader investment strategy in the Middle East, Bloomberg reported. The US company is part of a $20 billion venture with Qatar’s sovereign wealth fund focused on artificial intelligence infrastructure.

German logistics giant, DHL Express, has likewise said it will proceed with plans to invest roughly $570 million in the Middle East through 2030, focusing on Saudi Arabia and the United Arab Emirates.

Some local deals have moved ahead. On March 11, Saudi mining company Saleh Abdulaziz Al Rashed & Sons raised about $67 million from an initial public offering and began trading shares on the kingdom’s stock exchange. More broadly, however, the conflict is casting uncertainty over the region’s IPO pipeline, which had surged in recent years before cooling somewhat in 2025.

Sovereign shift

The Gulf’s sovereign wealth funds could play an increasingly important role in stabilizing investment activity if the conflict drags on and inflicts further damage on key sectors. Regional funds have historically invested vast oil revenues overseas, building portfolios spanning technology, real estate and sports assets. But governments may now be reassessing how that capital is deployed as economic risks rise.

On March 11, Reuters reported that Gulf states are reviewing how they will deploy capital to offset losses linked to the war, including potential investment pledge reversals and divestments.

A shift toward greater domestic investment wouldn’t be unprecedented. Saudi Arabia’s Public Investment Fund has already become a major driver of local economic development as part of Crown Prince Mohammed bin Salman’s Vision 2030 diversification push. Other sovereign funds in the Gulf could adopt similar strategies going forward.

FDI in the Gulf region remains heavily concentrated in the UAE and Saudi Arabia. While full-year figures for 2025 aren’t yet available, the UAE attracted $45 billion in FDI inflows in 2024, according to United Nations Trade and Development data. Meanwhile, Saudi Arabia’s FDI inflows totaled $19.3 billion through the first nine months of 2025, up from $14.5 billion during the comparable period in 2024.