The UAE recorded zero initial public offerings in 2026, a stark measure of how the Iran conflict has paralyzed regional investment and economic growth. Dan Simkowitz, co-president of Morgan Stanley, says this freeze won't last. Once the war stabilizes or ends, he expects a decisive rebound in the Gulf IPO market.
The contrast with 2025 is telling. One year ago, UAE companies raised $1.1 billion through three IPOs, according to Dealogic data. That activity has simply stopped. The conflict began on February 28 and continued through early April with retaliatory strikes between the US, Israel, Iran, and Tehran's Arab neighbors. It has created what Simkowitz calls a "slightly higher risk premium" across the region—one serious enough to halt capital flows to equity markets.
Yet the economic toll runs far deeper than IPO numbers. A World Bank report released in recent weeks revised its forecast for Gulf economies downward by 5.7 percentage points, projecting an average contraction of 4.3 per cent in 2026. The International Monetary Fund also expects contraction this year, though it projects a strong recovery in 2027 if shipping normalizes. That will be a key measure of whether the fragile ceasefire holds and regional tensions ease.
The Human Cost Behind the Numbers
These figures represent real people: workers in suspended projects, families whose livelihoods depend on foreign investment, and communities relying on diversified economic growth that the war has interrupted. The freeze isn't abstract. Companies are reassessing supply-chain resilience and geographic diversification. Some deals have paused entirely. Uncertainty doesn't just slow growth—it redirects capital, delays hiring, and postpones expansion that would have created jobs across the region.
Simkowitz acknowledged this reality in his assessment. "Most" of the active deal pipeline remains underway, he told The National, but that qualification itself reveals the damage: in a functioning economy without regional conflict, "most" wouldn't need to be qualified at all.
Credit Markets and the Path Forward
Beyond equities, Simkowitz expects Gulf credit markets to expand once conditions stabilize. Gulf debt capital markets had $1.2 trillion outstanding at the end of the first half of 2026, with more than $100 billion raised in regional debt markets that year, according to Fitch Ratings. Bond and fixed-income markets are necessary, Simkowitz argued, to support growth and economic resilience—the very resilience now being tested by war.
Morgan Stanley has doubled down on the region despite the conflict. The bank opened an Abu Dhabi office two years ago and now employs well over 100 people across the Gulf, with plans to expand further. Simkowitz described Morgan Stanley's commitment as "as strong as it's ever been," and emphasized that even amid regional uncertainty, corporate clients remain focused on long-term fundamentals: demographics, potential GDP growth, and market diversification.
This confidence has limits. S&P Global Ratings warned that while positive credit momentum has held through 2026, sustained strength will become "harder to sustain" heading into the fourth quarter. The agency cited sharp rises in benchmark borrowing costs and investors' bets that major central banks face a "complex challenge" in fighting inflation. The global economic picture—not just regional conflict—is tightening conditions on which the Middle East depends.
Artificial Intelligence as Economic Lifeline
Simkowitz identified AI as the defining economic theme and called the UAE "one of the world's most important AI players" relative to its GDP and market capitalization. A Bain report projects the AI industry will need to earn $6 trillion in annual revenue by 2031—five years from now—to justify the capital being deployed for data centers. That's a staggering bet on future productivity. For now, companies are building computing capacity ahead of the revenue it will generate, though Simkowitz noted that timing gap is shrinking.
The region's ability to capitalize on AI investment depends on stability. Capital flowing into Gulf data centers and computing infrastructure can't afford disruption from regional conflict. Every month the ceasefire holds without formal resolution is a month when investment decisions can proceed. But investor confidence isn't infinite, and the fragile April ceasefire carries no guarantee of permanence.
Diplomatic Uncertainty and Market Reality
Simkowitz acknowledged the elephant in the room: markets will watch the US midterm elections in early November 2026, while uncertainty over the US-Iran war, the Ukraine-Russia conflict, and inflation will persist. When asked about the outlook for 2027, he was blunt: "I think intense and don't be complacent. No one can be complacent. It may not be as dramatic [as this year], but it's going to be intense."
That's not the language of confidence. It's the language of markets pricing in risk that shouldn't exist. A region with the UAE's financial infrastructure, capital depth, and growth potential shouldn't be waiting for a fragile ceasefire to hold before companies can go public or investors can commit to long-term projects.
Why This Matters:
The frozen IPO market isn't just a financial metric—it's evidence of how regional conflict, even when managed through temporary ceasefires, erodes the economic foundation for stable growth and job creation. The World Bank's downward revision, projecting an average contraction of 4.3 per cent across Gulf economies, will translate into delayed wages, postponed hiring, and reduced investment in public services at precisely the moment when stability matters most. The Middle East has the capital and capacity to rebuild, Simkowitz argued, but that capacity sits idle while political resolution remains elusive. The longer the war's aftermath festers without genuine diplomatic progress toward de-escalation and conflict resolution, the longer capital remains cautious and markets remain frozen. For ordinary people across the Gulf—workers, families, small business owners—that's not an abstract concern. It's the difference between economic opportunity and stagnation.