[Edaily Marketin Soyoung Park Reporter] The global investment banking (IB) industry is turning its attention to the Middle East, home to a host of the world’s largest sovereign wealth funds. “Oil Drive” is a series covering news from the Middle Eastern investment market. It explores stories of global investment firms tapping into oil money, as well as local developments in the Middle East as the region seeks 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]

The Middle East and North Africa (MENA) region is transforming into a new testing ground for the defense industry. This trend is becoming even more pronounced as the conflict between Iran, the United States, and Israel drags on. This is because the Middle East is now seeking to transform itself from a mere consumer market for weapons into a hub for testing and producing cutting-edge defense technology. In particular, the defense artificial intelligence (AI) market is flourishing through cooperation between the United Arab Emirates (UAE) and the United States. Korean industry officials also view the expansion of the advanced defense market, centered on the UAE, as an opportunity.

U.S

According to the global investment banking (IB) industry on the 24th, the United States and the UAE have launched a defense AI task force (TF) called “Talon Synapse.” The task force will operate out of Abu Dhabi, the capital of the UAE. Approximately 20 experts in AI, data, and cybersecurity will collaborate on the joint development of defense AI. The two countries plan to apply AI in practical ways, such as for intelligence support, the protection of critical infrastructure, and regional security monitoring.

Previously, in July, the U.S. significantly eased export controls on the UAE. In doing so, it lowered the barriers not only for advanced AI chips but also for the export of △military equipment, △commercial satellites, and △dual-use items. EDGE, the UAE’s state-owned defense company, has agreed to establish a joint venture (JV) with U.S.-based Anduril in the UAE, build a production system, and jointly develop next-generation autonomous systems.

Regarding this bilateral cooperation, industry observers assessed that a single defense AI ecosystem is taking shape in the UAE, encompassing △computing, △AI, △autonomous systems, △local production, and △military operations. In particular, new technologies deployed to the Middle East in the wake of the Iran conflict are now being put into actual combat. The wartime technology innovation cycle—in which battlefield requirements are incorporated into development and improvement—is accelerating.

The reason both countries are building software- and AI-based weapon systems is clear: software and AI enable the integration of △simultaneous control of multiple drones △target identification △analysis of intelligence, surveillance, and reconnaissance (ISR) data △autonomous flight in environments with jamming or restricted communications △threat prioritization △and the defense of critical infrastructure.

The industry assesses the developments in the Middle East as “a trend similar to that in Ukraine, which has become a massive testing ground for global defense technology since the Russia-Ukraine war.” However, there are differences. In Ukraine, numerous startups are receiving direct feedback from the front lines and developing new technologies. In contrast, the MENA region, centered on the UAE, relies on abundant sovereign wealth fund capital and weapons purchasing power. It is also forming technological alliances with the U.S. to attract global technology companies.

Domestic industry insiders are also closely watching the cooperation between the UAE and the United States. They predict that there will be significant opportunities for Korean companies and investors to explore in the UAE in the future. South Korea and the UAE are already expanding their defense cooperation beyond simple arms exports to include △joint development, △technological cooperation, and △local production. In addition, the two countries are pursuing joint investment and development in the field of AI.

An official in the investment banking industry stated, “Following in the footsteps of domestic venture capital firms, startups are rushing to Ukraine to conduct proof-of-concept demonstrations and secure project contracts,” adding, “A similar trend could emerge in the Middle East, particularly in the UAE, as companies seek opportunities there.” He continued, “I believe the key will be how quickly we can jointly develop and validate dual-use technologies—such as AI, sensors, drones, anti-drone systems, robots, cybersecurity, and satellites—that serve both civilian and military purposes.”