How Iran’s War Since 2026 Has Affected the Gulf Startup Market: Experts Weigh In

In February, King Lai, the founder of King, arrived in Abu Dhabi from Hong Kong. He joined the latest cohort of Hub71, one of the region’s largest accelerators. But within days, capitals across the Gulf began to see strikes linked to the escalation around Iran. Still, the entrepreneur didn’t leave: he signed up his first local clients and started building relationships with Emirati venture funds.

Similar stories played out in Abu Dhabi, Dubai, Riyadh, and Doha. Despite the military events that began on February 28, paused after the April ceasefire, and then flared up again in July around the Strait of Hormuz, investors continued to announce deals. Yet the overall picture remained mixed: in the first half of the year, metrics stayed low—and the decline had started even before the war became a factor.

Experts say the issue isn’t so much “fear of war” itself, but the way conflict undermines trust and willingness for teams to travel, meet in person, and negotiate face-to-face—something that takes time to rebuild.

Two takes on the market: how much funding really fell

Two research centers report different figures for the region’s investment drop. MAGNiTT, a Dubai-based tracker used by Bloomberg, reports that MENA raised $1.35 billion in the first half of the year. That’s 22% less than a year earlier. Deal volume fell even more sharply—down 41%, to 214. According to MAGNiTT, it was the weakest first half since at least 2022.

Wamda, together with Digital Digest, paints a softer picture: $1.7 billion across 242 rounds, a year-on-year decline of 18%. The gap comes down to methodology. Wamda includes debt financing and defines a “round” more broadly, while MAGNiTT is closer to counting deals specifically tied to equity capital.

Still, both agree on the core point: the direction of decline is the same, but what remains is distributed unevenly. Capital is now more heavily concentrated in the UAE, which attracts two-thirds or more of the region’s venture funding. The mid-market segment has noticeably cooled, while money is flowing into a handful of large rounds.

The drop started before the war: why the numbers didn’t “catch up”

A venture deal rarely forms overnight. The period from agreement to closing a round is typically 6–9 months. As a result, much of what shows up in first-half metrics reflects decisions made in 2025—when the regional war was not yet part of the calculation.

As Philip Bahoshy from MAGNiTT notes, the market “didn’t have time” to reflect the shift in sentiment in the numbers. At the same time, the more sensitive indicator—early-stage deals—fell even more, by more than half.

Only a few large deals managed to keep the top-line figures in the first half. Two rounds totaling $480 million supported the overall outcome. Without them, the baseline would look weaker. The largest ten deals captured 58% of all capital.

A repeat of the 2020 scenario is expected: in the first half, headlines were supported by announced deals, but the “pause” in the funnel showed up in the second quarter. At the same time, the exit market tightened: M&A dropped 56% to 16 deals, and the share of foreign investors—after a period when they had been running ahead of local players—roughly halved.

Why founders stayed put

Founders didn’t stay because they liked a “conflict zone.” The reason is more practical: some money has already been received or conditions have already been locked in, and emigration or switching jurisdictions is expensive. Moreover, Gulf countries have spent years designing the ecosystem so that both capital and key participants meet there.

Jeremy Savory puts it bluntly: “The UAE was originally built as a ‘room’ where capital and the people who need it—and provide it—really intersect. And now you’re testing whether that logic can withstand real pressure.”

Hub71, Abu Dhabi’s program backed by Mubadala, pays startups AED 250,000 in cash for an equity stake and another AED 250,000 in services (about $136,000 total). It also offers subsidized housing and office space. In the February intake, 27 spots attracted nearly 2,500 applications. For the first time among the selected companies, there were no Emirati startups. Yet after the strikes began, no team dropped out.

Qatar is even more aggressive. In February, weeks before the first major flare-up, the Qatar Investment Authority (QIA) increased its Fund of Funds program to $3 billion (up from the $1 billion launched in 2024). Doha welcomed 12 global managers, including B Capital, co-founded by Eduardo Saverin (Facebook). By the end of February, roughly a third of the pledged volume had already been deployed.

A separate initiative, Startup Qatar, processed more than 7,700 applications and—according to Bloomberg—funded 45 companies for $51 million, with 11 of them receiving support after hostilities started.

In Dubai and Saudi Arabia, there are local equivalents. Dubai Founders HQ launched before the escalation: its first cohort ran in April. In Saudi Arabia, startups go through incubators such as The Garage and Sanabil Accelerator, then gain access to government-backed funding sources, including Saudi Venture Capital and the Jada Fund of Funds.

The system leans on local success stories—often used as evidence in international pitching. Examples include Tamara, Ninja, Foodics, and Jahez, the food-delivery company that expanded into a parallel Saudi Exchange market in January 2022.

The key condition: relocating the founder

Almost all programs share a common principle: the founder must be in the country in person. Startup Qatar requires at least one resident among the co-founders, and Hub71 expects a similar approach. In 2024, Golden Gate Ventures relocated partner Michael Lints from Singapore to Doha to run a $100 million fund backed by Qatari families.

According to Savory, venture capital in the region rarely “follows the person” if that person continues to live abroad. Funds, in practice, are buying presence and engagement. “In nine out of ten cases, they need the founder to actually live here—not just fly in for meetings. If you moved your family, enrolled the kids in school, signed a lease—you won’t leave at the first sign of trouble. That’s what supports the capital.”

These rules are reinforced by migration policies. Amid a wider wave of international initiatives, Qatar expanded its offering: a 10-year entrepreneur residence visa was added on top of the 5-year permit that was already being issued. The UAE is also developing its golden visa program, while Saudi Arabia has Premium Residency. As a result, demand for relocation is less of a crisis reaction and more part of a clear life plan.

On paper, a “back up plan”: a second residence and a second passport

However, the fact that founders stay in the Gulf doesn’t mean they abandon contingency plans. Residency and citizenship specialists report rising demand for a second jurisdiction.

Elena Ruda, co-founder and managing partner at Immigrant Invest (a consultancy for residency and citizenship), believes the surge in interest in alternative passports and residency permits is driven less by flight and more by risk management. She says the logic resembles a global practice among mobile entrepreneurs: having more than one “backup” route—multiple banks, multiple places to live, and multiple documents—if suddenly a strategy change becomes necessary.

The pattern of inquiries supports this. Since March, the share of Immigrant Invest’s pipeline coming from the UAE has risen from about 7% to 15% and stabilized at that level. Among entrepreneurs, the number of requests has grown roughly threefold by April.

According to the company, interest from Qatar increased “more than four times” over the same period. In more than a third of conversations, regional security appears as one of the key topics. About 1 in 5 clients from Saudi Arabia raises the same concern.

The most popular destinations for mobile capital are countries typically associated with investment migration: Portugal, Italy, and Greece (golden visas), Spain (digital nomad visa), and citizenship options in Caribbean countries. Among them, Ruda says Grenada is the most in-demand.

At the same time, she emphasizes that almost nobody views a second jurisdiction as an “exit” from the business. “For most, it’s an addition of options, not a replacement. No one shuts down operations in the UAE and leaves the region—they simply increase resilience by keeping the business where it is. It’s the same approach people take with capital: think in portfolios, not in a single point risk.”

An unverified bet: how real is the resilience?

Despite all the infrastructure and programs, the Gulf is still not as large a hub as the world’s leading ecosystems. The talent pool is limited, and technology listings are rare. Not all investors see this as critical. For example, Alex Lazarev, founder of Fluent Ventures in San Francisco, points out that when he began investing in 2013, unicorns existed in only four cities, whereas today there are more than 300—and a growing share is coming from Saudi Arabia and the UAE. He doesn’t plan to slow down.

Still, Savory doubts the region has a comparable substitute. “People ask where else they can go. But the truth is, nowhere has that same combination. Big sovereign money is in one place, family offices are somewhere else, and maybe there’s a government that doesn’t get in the way. But nowhere can you assemble it all like you can here. In other places, you either wait too long or the bureaucracy is so complex that nothing gets done.”

Yet the war hasn’t fully served as a real test of that confidence. Capital is already in the system, and residency rules largely help keep founders in place. But what exactly supported resilience in the first half—real demand or “locked-in” commitments that simply reached the final stage—remains unclear.

Deals struck during the escalation period should start showing up in the third quarter. That’s when the picture will become clearer: whether it’s only a temporary pause or the beginning of a deeper reshaping of the Gulf startup market.

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