GCC wealth funds pivot to defensive sectors amid Iran conflict uncertainty

By Bindu Rai

GCC sovereign wealth funds are deploying capital to strengthen economic resilience amid uncertainty stemming from the Iran conflict, with dealmaking indicating a renewed focus on sectors such as energy, transportation, supply chain security, technology, and infrastructure development.

UAE wealth funds alone have invested close to $15 billion in outbound deals across these sectors, with transportation and energy assets driving dealmaking in the emirates, according to YTD data from the LSEG.

In July, Dubai Aerospace Enterprise (DAE) Ltd acquired Irish aircraft lessor Macquarie AirFinance for an enterprise value of $9 billion, making it one of the biggest GCC outbound deals of 2026 and one of the largest in the transport sector this year. For the UAE-based aircraft lessor, which is owned by the Investment Corporation of Dubai (ICD), the deal has further strengthened its transportation network with a fleet that is a 1,000 aircraft strong, which come at a time where makers such as Boeing and Airbus are struggling to ramp up production to meet airline demand.

Domestically, UAE wealth funds also topped the league table with Abu Dhabi wealth fund L’IMAD driving two take-private deals in 2026 in the defensive space, including the $1.55 billion acquisition of the Abu Dhabi National Energy Company (TAQA) in August, followed by the $2.1 billion pending acquisition of AD Ports Group.

In a recent report, industry tracker Global SWF pointed out that while L’IMAD has not identified geopolitical influence as the reason for the AD Ports takeover, the site sits at the centre of Abu Dhabi’s ports and logistics network, while its international expansion has connected those assets with trade routes across Africa, Europe, South Asia and Latin America.

Rise in risk

According to a Europe-based asset manager with ties in the GCC, the surge in defensive investments in the region is not just a “knee-jerk” reaction to protracted US-Iran war but also marks a shift in appetite over a rise in geopolitical risk globally with tariffs and war driving the conversation.

“I think there’s just a rebalancing where investors are chasing decent returns, but with an element of defensive characteristics, so they know their capital is protected,” he said. “The strategies being pursued here are not targeting single digit returns. This is targeting returns that are attractive, but also at the same time offering downside protection that ensures your capital is preserved.”

In a September report, Deloitte highlighted that for many GCC countries, the priority is no longer only to acquire capability, but to build greater sovereignty, resilience, and operational agility. This means strengthening local defense industries, improving interoperability across domains, and creating secure digital foundations that support faster decision-making and more effective mission delivery.

“As regional ambitions continue to evolve, defense leaders have an opportunity to shape modernization in ways that support both national security objectives and broader economic value. The result is a more sustainable and adaptable defense ecosystem, better positioned to respond to emerging threats and future operational demands,” it said.

According to Ben Powell, Managing Director, and Chief Investment Strategist for APAC within the BlackRock Investment Institute, energy defense and artificial intelligence are two forces that have inevitably become the backbone for an economy today.

“In a world of more frequent geopolitical shocks, where public markets reprice in real time to every headline, resilience has become as important as returns,” he said, while highlighting mega forces such as digital disruption and AI, geopolitical fragmentation, the energy transition, demographic divergence and the future of finance as driving future investment strategies.

(Reporting by Bindu Rai, editing by Seban Scaria)

bindu.rai@lseg.com