Middle East venture capital deals fall to five-year low in first half of 2026

Venture capital deal-making in the Middle East and North Africa fell to a five-year low in the first half of 2026. The number of deals plunged 41% from a year earlier to 214, while total funding declined 22% to $1.35 billion, according to venture capital data platform Magnitt.

Two-thirds of the funding was raised in the UAE. International investors reduced their share of invested capital by more than half compared with the same period a year earlier.

Funding constraints and investor shifts Magnitt CEO Philip Bahoshy said sovereign wealth funds and fund-of-funds have not scaled to match startup capital demand. Corporates are focused inward due to credit concerns, while family offices are directing capital toward AI investments outside the region.

Investors are concentrating funding into fewer, larger deals in AI, security, and defense, Bahoshy added.

Timeline and outlook Because venture deals typically take six to nine months to close, the first-half figures were largely set before the Iran conflict began, Magnitt said. Bahoshy stated the data has not yet caught up with current sentiment and predicted the decline could extend into 2027 if the conflict does not end soon.

Merger and acquisition activity fell 56% year-on-year to 16 transactions. Local stock markets have missed the AI-driven gains seen elsewhere, narrowing exit options for startups. Bahoshy said he is monitoring three metrics for a potential recovery: the return of international investors, an increase in early-stage deals, and more exits.

He pointed to the conference season beginning in September as a possible catalyst.