7 hours ago
Israel–Iran conflict could impact GCC IPO pipeline and valuations, warn analysts
The escalating tensions between Israel and Iran will likely hit business confidence in the GCC region, according to the latest geopolitical risk report by S&P Global Ratings, while analysts have warned of a trickle-down effect that could impact the region's IPO pipeline and put valuations at risk.
While no IPO has been delayed since the conflict escalated last week, analysts are braced for choppy markets. Nishit Lakhotia, Group Head of Research at Bahrain's Sico Bank, told Zawya that 'it makes prudent sense to not list in a hurry if the macro environment is not conducive and TASI [Tadawul All-Shares Index] itself is trading at June 2021 levels.'
Lakhotia's comment comes in wake of the Saudi Exchange closing on Sunday at its lowest level in 20 months, at 10,731.59. It opened almost 4% lower, at 10,429.67, before recovering most of its losses.
George Pavel, General Manager at trading platform added that the uncertainty markets have faced in 2025, triggered by April's US tariff turmoil, coupled with recession fears, could result in a deferred IPO pipeline in the region. 'The direct Iran–Israel conflict has acted as an acute shock on top of this fragile environment. Its immediate effect was to trigger sharp market sell-offs and extreme volatility. This instability is making new IPOs more challenging as investor confidence declines,' he stated.
All eyes are currently on two major listings coming out of Saudi Arabia: Specialized Medical Company, which closed its retail offering for 15 million shares on the Main Market at 25 Saudi riyals ($6.66) per share on Monday, and budget carrier flynas, which will start trading on Tadawul from June 18.
Kate Leaman, Chief Market Analyst at AvaTrade, said the current escalation has introduced fresh uncertainty into the region's IPO plans and that the tone has shifted. 'For large, state-backed deals in particular, this conflict is forcing a rethink,' she said. 'Some issuers may delay. Not indefinitely, but enough to wait for volatility to ease. Deals planned for Q3 may slip into Q4, and a few could even push into 2026, depending on how this unfolds.'
According to Leaman, it's not a total freeze, as several smaller IPOs, 'especially those focused on local markets, are moving forward' as they are less exposed to global capital flows and investor sentiment tied to geopolitics.
'In essence, the IPO window isn't shut; it's just narrowed. Big-ticket deals may hold off for stability. But domestic, sector-resilient names could still see strong demand. Unless the conflict escalates further, expect IPO activity to continue in a more cautious, targeted fashion,' she said.
Investor sentiment
Valuations have also come under scrutiny, with Lokhatia noting this will play a 'central role' in determining the success of the IPOs hitting the market in the coming weeks.
Pavel cautioned as well that investors could also use their position to negotiate pricing.
'The conflict forces an immediate and rational repricing of risk, making investors more price-conscious. Investors could demand a significant 'geopolitical discount' to compensate for the new risks of wider tensions. This means issuers must accept lower valuations to attract capital. Speculative, high-growth companies, particularly in tech, could find private market valuations intensely scrutinised and likely unattainable in the current market.'
Vijay Valecha, CIO at Century Financial, had a different take, drawing parallels with US President Donald Trump's 'back-and-forth trade policies threatening global supply chains', which sparked expectations of an inflationary environment and caused analysts to expect valuations of IPOs to be affected.
'Despite that, Dubai's Holdings' REIT was priced at the top end of the range and listed at a market valuation of 14.3 billion UAE dirhams ($3.9 billion), firmly positioning it as the largest listed REIT in the GCC,' he said.
According to Valecha, GCC markets have become habituated to geopolitical escalations, 'with market participants seeing them as short-term interruptions to rallies and using the dips to enter the market.'
(Reporting by Bindu Rai, editing by Seban Scaria)
