The UAE’s capital markets recorded zero IPO listings through October this year as uncertainty over regional conflict stalled investor confidence. Dan Simkowitz, co-president of Morgan Stanley, tied the drought directly to the Iran war, which began on February 28 and has left the Middle East in a fragile ceasefire since early April.
This isn’t a minor market correction. UAE companies raised $1.1 billion through three IPOs in 2025. This year, nothing. The contrast gets to the heart of why geopolitical instability matters in finance: investors don’t deploy capital while the region’s security architecture remains unresolved.
The Regional Security Tax
Simkowitz told The National that the conflict “clearly creates a slightly higher and hopefully temporary risk premium in the region, but not so much that it changes long-term investment perspectives and investor interest.” That’s diplomatic language. The data paints a starker picture. A World Bank report released the previous week projected Gulf economies would contract by an average of 4.3 percent in 2026—a downward revision of 5.7 percentage points from its April forecast. The International Monetary Fund also expected contraction this year, though the fund’s managing director, Kristalina Georgieva, projected strong recovery in 2027 if shipping normalised.
This contraction isn’t theoretical. It’s the direct cost of regional conflict: disrupted supply chains, threatened shipping lanes, postponed foreign direct investment. Companies don’t go public during wars. They hoard cash, reassess risk and wait for clarity.
Why Markets Will Recover When Stability Returns
Simkowitz said he expects the IPO market to rebound once conflicts resolve or stabilise. Morgan Stanley’s commitment to the region, he said, “is as strong as it’s ever been.” The bank continues to consider investment in growth, while corporate and foreign direct investment clients remain focused on regional demographics, potential GDP growth and market diversification. Morgan Stanley opened an office in Abu Dhabi in 2024 and now has well over 100 employees across the region, with plans to expand in wealth and asset management.
The bank’s regional deal pipeline remains active despite the conflict. Some deals are paused as companies reassess supply-chain resilience and diversification, but “most of it that was on is underway,” Simkowitz said. Morgan Stanley, headquartered in the US with more than $10 trillion in assets, has operated in the region for the past 20 years. Its regional presence signals confidence in eventual recovery.
Credit Markets: The Real Growth Engine
IPOs have dried up. Credit markets, though, are positioned to expand. Gulf debt capital markets held $1.2 trillion outstanding at the end of the first half of 2026, according to Fitch Ratings. More than $100 billion had been raised in regional debt markets that year alone. Simkowitz called the growth of fixed-income and bond markets “incredibly important,” both in the Gulf and globally.
Recent discussions with Gulf finance ministries, stock exchanges and other leaders have increasingly centred on bond and credit markets. This is a natural next step after success with the Abu Dhabi Securities Exchange and other Gulf exchanges in equities. Credit markets are needed alongside equity to support growth, diversification and resilience. The expansion reflects what Simkowitz called “a period where high capex manufacturing is back.” In that context, credit markets, sovereign wealth funds and pension funds—not just banks or governments—must bridge the gap between capital deployment and revenue generation.
S&P Global Ratings said in a report that economic tailwinds from AI investment and “surprisingly enduring demand” had bolstered credit conditions in many major economies in 2026. The agency also warned that risks are building amid sharp rises in benchmark borrowing costs, including yields on government debt, as investors bet major central banks face a complex challenge in fighting inflation.
The Artificial Intelligence Factor
Simkowitz called AI the dominant economic theme and “incredibly transformational.” He described the UAE, relative to GDP, wealth or market capitalisation, as one of the world’s most important AI players. A recent Bain report projects the AI industry will need to earn $6 trillion in annual revenue by 2031 to justify capital deployed for data centres. Revenue from new product development is projected to become the industry’s largest contributor, generating about $4.2 trillion to fund the technology’s global market within five years.
“We’re reasonably bullish on AI-related revenue,” Simkowitz said. Computing capacity must come before revenue and productivity gains, though the timing gap is shrinking. Transformative technology doesn’t follow a linear path, and not every player wins. Users benefit, though, and some companies delivering the technology could win significantly.
What Comes Next
Simkowitz cited continuing uncertainty over the Iran war, the Ukraine-Russia conflict and inflation. Investors are watching the US midterm elections in early November, though he said they’re “not nearly as consequential” as presidential elections, including upcoming elections in Brazil or France. On the 2027 outlook, Simkowitz offered a measured assessment: “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.”
The message is clear: regional stability is a prerequisite for capital market recovery. Until the Iran conflict resolves or stabilises, the UAE’s IPO market will stay dormant. Credit markets and long-term AI investments will continue because they carry a different risk calculus. But the IPO drought directly measures the real-time cost of geopolitical uncertainty to finance.
Why This Matters:
The UAE’s IPO freeze shows how regional conflict imposes immediate economic costs beyond military spending or humanitarian casualties. When the Middle East’s security architecture remains unstable, capital retreats from equity markets and companies defer public offerings. That creates a feedback loop: economic contraction deepens uncertainty, which deepens caution. The World Bank’s downward revision of Gulf growth projections—5.7 percentage points—quantifies the cost of diplomatic failure. Morgan Stanley’s confidence in eventual recovery rests on the bank’s 20-year regional presence and deep relationships with Gulf leadership. But confidence alone won’t restart capital markets. Resolution or sustained stability will. Until then, the region’s investment potential remains locked up, and companies that could generate jobs and diversify Gulf economies stay private. From a security perspective, this shows why regional stability isn’t an optional diplomatic goal—it’s an economic necessity for the Middle East’s future growth. The conflict’s persistence carries a price tag measured quarterly in capital flows.