Gulf FDI rose in 2025 but war puts outlook at risk

• World Investment Report tracks flow
• ‘Strong growth’ for UAE and Saudi
• War likely to weigh on performance

The United Arab Emirates and other Gulf states’ inbound and outbound foreign direct investment grew in 2025 against a “fragile and uneven” global recovery, according to new research from UN Trade and Development (Unctad).

The latest World Investment Report, published on Tuesday, covers the 12 months ending December 31, and does not account for shifts in FDI that may have occurred since the US-Israeli war with Iran broke out on February 28.

The Gulf “benefits from its role as a corridor between Asia, Europe and Africa,” Unctad said in the 225-page document, “but rising geopolitical tensions are likely to affect the implementation of announced projects and increase downside risks for FDI, particularly in energy, transport and logistics”.

Investment inflows to West Asia – an 18-country region that the UN agency defines as including the six members of the Gulf Cooperation Council as well as Yemen, Syria, Turkey, Iraq, Jordan and Lebanon – grew from $86 billion in 2023 to $92 billion in 2024 and nearly $111 billion last year.

Outward flows from West Asia rose from $60 billion to $142 billion over the same period.

By comparison, global FDI increased 6 percent year on year, from $1.5 trillion in 2024 to $1.6 trillion. This ended two years of decline, but distribution remained highly concentrated in developed economies and a few mega-projects for artificial intelligence, according to the report.

“The United Arab Emirates and Saudi Arabia recorded strong growth, driven by energy, infrastructure and diversification strategies,” Unctad found.

Strategic flows

The Emirates were the world’s ninth-largest recipient and source of foreign investment last year, and Saudi Arabia the 13th country globally for inbound FDI.

Emirati flows largely went into strategic, advanced technology sectors such as semiconductors, AI infrastructure and batteries.

The UAE is financing major data centre projects, including commitments by real estate developer Damac and AI investment fund MGX in the US and France, respectively.

Qatar’s inbound investment jumped from $460 million to $3 billion as part of build-outs in the chemicals, energy and IT industries, according to the report.

The region now accounts for about 7 percent of global inbound and outbound FDI, the latter driven by ambitious sovereign wealth funds and state-linked entities such as the UAE’s Mubadala and Masdar, a renewable energy company, and Saudi Arabia’s sovereign Public Investment Fund and utility company Acwa Power.

A $10 billion capital investment by India’s Rana Group in a smart manufacturing hub in Ras Al Khaimah, Microsoft’s $5.5 billion data centre bet in Abu Dhabi, and a $4.2 billion commitment by Saudi developer Dar Al Arkan to build a new city in Oman were among the top 10 greenfield investments in developing Asia last year, the report found.

The war is “likely to weigh on” this performance, Unctad warned.

“A prolonged conflict could redirect capital toward domestic priorities, reconstruction needs and strategic infrastructure within the Gulf, reducing the availability of outward investment for developing economies in Asia and Africa that increasingly rely on GCC financing,” the report said.

• UAE leads US and Britain as top FDI investor in Qatar
• Iran war threatens to undermine Saudi FDI efforts
• Damac secures capacity worth $12bn for US AI data centres

In 2025, the UAE pledged $1 billion to boost Yemen’s traditional and renewable energy sectors.

It had also announced a year earlier a $35 billion investment to develop a tourism, commercial and residential hub in Ras El Hekma, on Egypt’s Mediterranean coast.

The project brought FDI flows into Egypt and North Africa to an exceptional level in 2024, according to Unctad.

They naturally fell 56 percent regionally in 2025, though Egypt remained the largest recipient of foreign investment across Africa, with about $15 billion in inflows.