How the Iran war could hurt Wall Street

SINCE the earliest days of human civilisation, the world has been hooked on Middle Eastern exports, from textiles and spices in ancient times to oil and holidays today.

The disruption to those physical trade flows – and the risk of an inflationary spike – is a well-documented consequence of the war being waged by the US and Israel against Iran.

Less analysed is the prospective hit to the Middle East’s export of capital.

The region’s sovereign wealth funds – from Saudi Arabia’s Public Investment Fund (PIF) to the Qatar Investment Authority and the Abu Dhabi Investment Authority – are among the biggest investors in the world.

They conduct and finance mergers and acquisitions (M&A), support private capital investment and inject funds into the biggest asset managers.

Last week’s boom-time first-quarter results from Wall Street’s titans – particularly the bonanza in M&A fees generated by the likes of Goldman Sachs and JPMorgan Chase, and the strong inflows registered by BlackRock – reflected the ongoing importance of Middle East sovereign wealth money.

Global SWF, a research organisation, has found that sovereign investors channelled more than US$140 billion into the US economy last year.

This lifted the share of global sovereign deal activity accounted for by US investment to more than 50 per cent.

Despite a slowdown in global M&A activity overall, the Middle East grew strongly in 2025.

Deals within the Gulf Cooperation Council, which spans Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman, amounted to nearly US$73 billion, up 170 per cent, according to law firm A&O Shearman.

Though much sovereign wealth money is still put to work quietly, the boldness of transactions has clearly been increasing, too.

Alongside Silver Lake and Affinity Partners, PIF, the Saudi sovereign wealth fund, did the world’s biggest leveraged buyout in 2025 when they took private US gaming group Electronic Arts in a US$55 billion deal.

JPMorgan underwrote a record US$20 billion debt facility to support the transaction.

An evolving scene

As tensions in the Middle East have remained high, there has been a mass scramble on Wall Street to profess confidence that the war has changed nothing on the financing front, and that Gulf investment flows will continue unabated – and not just in one direction.

Leading a charm offensive in the region has been Jon Gray, the Blackstone president, who unveiled a US$250 million investment in a UAE payments infrastructure group, even as the conflict was raging.

In late 2025, Blackstone partnered with PIF-owned artificial intelligence group Humain in a US$3 billion data centre deal.

Both transactions illustrate the evolution of dealmaking in the region.

A decade or more ago, Gulf money was channelled abroad into an array of trophy assets.

Today, countries are centring investments more on strategic priorities, such as AI, supply-chain organisation and the energy transition.

And sovereign wealth funds are also demanding inward investment from US partners, alongside commitments to open offices, train staff and share intellectual property locally.

So will the war spoil the party? Wall Street bosses, when quizzed about potential disruption to such a crucial deal flow on last week’s earnings calls, did their best to sound sanguine.

Larry Fink, BlackRock’s chief executive, addressed the topic most directly, insisting that “money is continuing to flow into their sovereign funds; their investment behaviour has not changed”.

Experts agree that the trend of Middle East governments diversifying from their reliance on a fossil-fuel economy – and doing so in large part via Wall Street intermediaries – is unlikely to change.

The big unknown, however, is how the current conflict could alter the region’s investment priorities in the next year or two, as states rebuild and address local economic fallout.

“Capital in Saudi will quietly be diverted away from PIF,” predicted one former UK minister who knows the region well. “It will go towards building oil pipelines and rebuilding the domestic economy.”

Citigroup boss Jane Fraser also wrote a recent memo to staff declaring that even if the region’s direction of travel was set, “momentum may have paused”.

Wall Street groups that have shown their preparedness to commit money on the ground may be best placed to pick up reconstruction deals in the short term.

It is too early to judge the financial appeal of such investments.

But the signal it sends to Gulf money about loyalty and deep personal relationships could stand them in good stead for long-term international dealmaking, too. FINANCIAL TIMES