- Funding likely to drop ‘for a period’
- AI and security sectors may benefit
- BlackRock warns against indiscriminate de-risking
The intensifying Iran war will likely dissuade venture capital funds and other investors from committing new money to startups in the Middle East and North Africa (Mena), although such a hiatus should prove temporary, industry experts predict.
The Mena tech sector has flourished this decade, especially in the UAE and Saudi Arabia, as government initiatives encourage the region’s young, tech-savvy population to launch businesses.
Including debt, Mena startups raised a combined $7.5 billion in 2025, up more than three-fold against the previous year, according to tech accelerator Wamda. Of the 2025 total, $4 billion was debt.
Yet this expansionary trend should slow after Iran launched retaliatory strikes across the Middle East in response to US-Israeli attacks that killed Iranian supreme leader Ayatollah Ali Khamenei. Tehran has targeted a number of countries in the region, including Saudi Arabia, the UAE, Kuwait, Qatar and Bahrain.
“Funding in many sectors will drop for a period, as we will see a natural pulling back of investor risk appetite,” said Lucy Chow, limited partner at London-based early-stage fund Pact VC.
“However, there will be sectors, such as those related to supply chains, AI, transport, human capital and security that will see an influx of funding.”
Investment into fintech startups rose more than five-fold last year to account for nearly three-fifths of all fundraising, or $4.4 billion, Wamda wrote in a January report. Property technology companies were second with $1 billion, while ecommerce businesses raised $373 million.
“There will be both short- and long-term changes to how founders approach building startups in Mena as a result of this conflict, but it is too early to say concretely what the lasting impact will be,” said Sam Marchant, founder of Dubai-based VC Forward Pursuit.
Last year, Saudi companies raised $5 billion across 211 deals, while UAE startups secured $2 billion in funding via 218 agreements. Egyptian small businesses netted $263 million, Wamda estimates.
US investors were involved in 144 Mena startup deals in 2025, second only to Saudi investors who participated in 227 transactions. UAE investors were third, joining 114 deals.
Such activity levels may be tough to replicate in 2026.
“Investors and global markets are still trying to figure out how to respond,” Chow said. “In terms of dealmaking, nothing has been pulled, but nothing has advanced either. This is still too fresh and there will be a natural, ‘wait and see’ approach around deployment of capital.”
BlackRock, which has $14 trillion in assets under management, said in a research note it is not changing its investment views despite the worsening conflict.
“(We) stand ready to lean against any market overreactions,” the BlackRock Investment Institute wrote.
“These developments are being shaped by three core variables: the duration of hostilities, the degree of disruption to energy transit and the political end-state. Their interaction will determine whether this remains a short-term volatility shock or evolves into something more persistent.”
Investors would be ill-advised to undertake “indiscriminate portfolio de-risking”, BlackRock added.
