[E-Daily Marketin Soyoung Park Reporter] The global investment banking (IB) industry is turning its attention to the Middle East, home to the world’s largest sovereign wealth funds. “Oil Drive” is a series covering news from the Middle Eastern investment market. It covers stories of global investment firms diving into “oil money” as well as news from the Middle East itself, where countries are seeking to move away from oil dependence and focus on investments in new technologies. It also reports on South Korean companies attracting investment from Middle Eastern capital. [Editor’s Note]

Geopolitical tensions surrounding the Middle East and North Africa (MENA) region are escalating once again, as the United States and Iran have resumed large-scale military clashes. On the 8th, U.S. President Trump stated, “I consider the interim memorandum of understanding to end the conflict with Iran to be over.” Oil prices and global financial markets reacted immediately.

Amid this heightened uncertainty, one country has seen a surge in global capital: the United Arab Emirates (UAE). Last year, foreign direct investment (FDI) inflows into the UAE reached a record high. Local observers assess that the UAE has further solidified its position as a “global investment hub” on the back of this trend. For the UAE, which needs to accelerate its economic diversification policy, the inflow of global capital is essential. Local officials believe that even as regional uncertainty persists, the UAE will continue to offer various incentives to attract FDI.

According to the global investment banking (IB) industry on the 9th, the amount of FDI flowing into the UAE reached a record high, ranking 9th globally. The United Nations Conference on Trade and Development (UNCTAD) reported in its Global Investment Report that FDI inflows into the UAE last year totaled 177.3 billion dirhams (approximately 72.8082 trillion won). This represents a 6% increase from the previous year. With this, the UAE has set a new record for FDI inflows for the fourth consecutive year.

FDI inflows into the UAE were primarily concentrated on greenfield investments, such as the establishment of new factories and corporations. Greenfield investments accounted for 45% of total FDI inflows. In addition, there were investments made through mergers and acquisitions (M&A) and by foreign companies operating in the UAE that reinvested their local profits into business expansion rather than repatriating them to their home countries.

An official in the investment banking industry operating in the region stated, “As major countries in the Middle East and North Africa (MENA) region, such as the UAE and Saudi Arabia, implement economic diversification policies, ‘localization’ is the aspect they prioritize most,” and “Because they have overhauled policies and made efforts to encourage global companies and capital to establish a local presence, transfer technology, and invest in local infrastructure, it appears that the inflow of foreign investors is increasing in this area,” the source added.

Previously, the UAE announced its National Investment Strategy 2031, setting a goal to increase annual FDI inflows to 240 billion dirhams (approximately 98.5296 trillion won). It also stated its intention to expand the cumulative total of FDI to 2.2 trillion dirhams (approximately 903.1880 trillion won) by 2031. To boost FDI inflows, the UAE sought to establish foreigner-friendly tax policies and a secure investment environment. To lay the groundwork for this, the government announced last November that it would establish a National Investment Fund worth 36.7 billion dirhams (approximately 15.0668 trillion won).

The UAE government also focused on boosting the stock market to improve the environment for foreign investment. Following the privatization of specific business units of state-owned enterprises, various policies to expand the size of the stock exchange have been implemented over the past few years. As a result, the Dubai Financial Market (DFM) announced that the Dubai stock market has grown by 191% since 2020, surpassing 1 trillion dirhams (approximately 411.1 trillion won). In particular, trading volume increased by 50% in the first quarter of this year alone as domestic and international investors continued their trading activities. Analysts suggest that investors were drawn to the market as prices adjusted amid geopolitical volatility and rising oil prices.

Another local industry official “Last year, officials from UAE government agencies visited South Korea and were actively promoting local investment. Now that they have recently resumed these activities, there have been a series of announcements regarding collaborations between UAE government agencies and state-owned enterprises with South Korean companies,” adding, “The strategy to attract FDI—which involves providing funding not only to South Korean companies but also to global firms and investment firms, establishing cooperative frameworks to help them set up local bases, and then encouraging reinvestment—is expected to continue steadily this year regardless of the war.”