Private equity and venture capital investments in the Middle East have increased so far in 2024, targeting businesses that are outside the oil and gas sector.

The Middle East — a region comprising 12 countries including oil-rich Saudi Arabia, the United Arab Emirates and Iran — attracted $2.28 billion for the third quarter to Sept. 27, according to S&P Global Market Intelligence data. The amount is already slightly higher than the $2.16 billion deal value for the full second quarter and nearly double the $1.19 billion in the first quarter.

However, the annual total is on track to fall well short of the $11.60 billion of capital attracted in 2023, particularly given the backdrop of continuing military conflict involving Israel, Palestine, Lebanon and Iran.

For the year to Sept. 27, Israel had the most deals in the region with 150 private equity-backed transactions, followed by the UAE with 70 and Saudi Arabia with 47.

The technology, media and telecommunications industry recorded the most activity with 124 deals totaling over $2.15 billion. Real estate had the second-largest deal value at $752 million, followed by the industrial sector with $741 million. Energy and utilities ranked the lowest with only two undisclosed deals even with rising private equity investment in global fossil fuel and renewable energy companies this year.

Real estate, industrials, GenAI make up top 3 deals

The region's largest deal so far this year is the acquisition by Lunate and Olayan Financing Co. WLL of a 49% stake in ICD Brookfield Place from Investment Corp. of Dubai and ICD-Brookfield Management Ltd. for $735 million. After the deal closed, Lunate and Olayan each owned a 24.5% stake in the Dubai, UAE-based business center.

The second-largest deal is Apollo Global Management Inc.'s planned $600 million purchase of a 50% stake in iron blending and distribution company Vale Oman Distribution Center LLC. The Vale SA subsidiary operates a maritime terminal in Sohar, Oman, with an integrated iron ore blending and distribution center that has a nominal capacity of 40 metric tons per year.

Third is Silver Rock Group's $325 million investment in UAE-headquartered generative AI company Pathfinder Global FZCO.

– Download a spreadsheet with data featured in this story. – Learn more about private equity trends in the advertising sector. – Read up on private equity deal activity in Southeast Asia.

Green energy investment bottlenecks

Renewable energy projects in the Middle East have taken a backseat this year as armed conflict remains the most pressing concern, according to Baker Institute's Middle East Outlook report.

Additionally, certain renewable energy projects such as green hydrogen production, which Saudi Arabia is pursuing to ease dependence on oil, are unattractive for investors and developers, according to Ian Palmer, an oilfield engineer and partner at Higgs-Palmer Technologies LLC.

"[The] future of hydrogen is limited by time and cost because its main application is in hard-to-abate industries like aviation, shipping and manufacturing of steel and cement," Palmer wrote in an email to Market Intelligence.

Potential investments to capture and store carbon emissions from industrial processes such as steel and cement production, as well as from fossil fuel combustion in power generation, also have limitations in the oil-rich Middle East.

"Carbon capture and storage won't save oil and gas because it would require an industry as big as [the oil and gas] industry," Palmer wrote.