MENA startup funding slumps as geopolitical tensions dampen investor onfidence

Startup investment across the Middle East and North Africa (MENA) plunged in the first quarter of 2026, with total funding reaching $941 million — a decline of 21.5% from the previous quarter and 37% year‑on‑year, according to a Funds Global MENA analysis. January posted strong activity with nearly $500 million across 59 deals, but geopolitical tensions involving the US, Israel and Iran, and a disruption to maritime trade after Iran moved to block the Strait of Hormuz, helped precipitate a sharp cooling in dealflow. By March, only 17 startups raised under $50 million in total.

Funds Global MENA said, "Funding activity slowed dramatically, with just 17 startups raising under $50 million in total, marking one of the weakest months in recent years."

Regional and sector breakdown

The UAE retained its position as the dominant investment hub despite the slowdown, drawing $625.8 million across 46 deals in Q1. Saudi Arabia recorded activity from 57 startups that raised $156.7 million, while Egypt placed third with $86 million across 12 transactions. Morocco and Bahrain posted smaller but notable figures, with Morocco securing $22.6 million from six deals — helped by a $15 million Series A by Yaakey early in the quarter — and Bahrain raising $22 million across two deals.

• Total funding (Q1 2026): $941 million
• January: close to $500 million across 59 deals
• February: $326.6 million
• March: 17 startups raised under $50 million
• UAE: $625.8 million across 46 deals
• Saudi Arabia: $156.7 million (57 startups)
• Egypt: $86 million (12 transactions)
• Morocco: $22.6 million (six deals), including Yaakey $15 million Series A
• Bahrain: $22 million (two deals)

By sector, financial technology continued to attract the most capital, accounting for 46% of total investment and drawing funding into 25 companies. Property technology (proptech) raised $228.6 million across 12 deals, while foodtech secured $60 million from three transactions. Alternative financing remained limited: debt funding comprised only 11% of capital deployed during the quarter.

Stage, investor sentiment and immediate causes

Investment activity favoured early‑stage companies in terms of deal volume: 110 startups raised $233 million collectively. Later‑stage funding was markedly subdued, with just seven deals accounting for $113 million — a sign of investor caution when it comes to scaling businesses amid geopolitical uncertainty.

Market sentiment saw a brief uptick around expectations of diplomatic talks in Islamabad, but optimism evaporated when negotiations collapsed days later, reinforcing fears that the slowdown could persist into the second quarter. The report highlights that disruptions to shipping through the Strait of Hormuz and broader regional tensions materially affected risk appetites and deal execution.

Outlook

Funds Global MENA’s analysis warns the weak March performance and the swift reversal of diplomatic hopes could delay a recovery for the startup ecosystem in Q2. With later‑stage cheques scarce and investors prioritising risk management, the region’s ability to return to the levels of activity seen at the start of the year will likely depend on both a de‑escalation of geopolitical tensions and renewed confidence from institutional and crossover investors.