US-Iran conflict unlikely to impact long-term capital inflows from Gulf countries

Dubai

• Gulf investments in India seen stable despite US-Iran tensions
• Most Gulf capital in India is long-term, less prone to disruption
• Short-term shifts possible if tensions escalate, experts caution

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Geopolitical tensions between the United States and Iran are unlikely to significantly disrupt long-term capital inflows from Gulf countries into India, as sovereign wealth funds and strategic investors from the region typically deploy capital with multi-decade investment horizons, according to market experts.

Investors from the Gulf region have invested nearly $33.5 billion in Indian companies over the last five years, data from LSEG shows, led largely by sovereign wealth funds, reflecting the growing strategic importance of India for capital from the Middle East. The year 2025 alone saw more than $7 billion in investments, led by Emirates NBD’s acquisition of a controlling stake in RBL Bank and International Holding Company’s $1 billion investment in mortgage lender Sammaan Capital, highlighting the continued appetite of Gulf investors for Indian assets.

Experts said that much of the capital flowing from the Gulf into India is directed toward long-term private market investments, rather than short-term positions in public markets. This structural feature makes the capital relatively sticky and less susceptible to immediate geopolitical disruptions.

“Middle East based sovereign funds typically operate under multi-decade mandates – so, a sudden shift in their broader investment strategy seems unlikely in the near term,” said Shreyas Bhushan, Partner at law firm Resolut Partners.

Sovereign wealth funds and large institutional investors from countries such as the UAE, Saudi Arabia and Qatar have steadily increased allocations to India over the past decade, backing sectors ranging from infrastructure and renewables to financial services, technology and consumer businesses.

Analysts added that the strong diplomatic and economic ties between India and key Gulf economies, particularly the UAE, have also helped create a stable framework for cross-border investment flows.

However, they cautioned that while long-term allocations are unlikely to change materially, short-term tactical shifts in asset allocation may occur if geopolitical tensions escalate further.

“We could of course see some degree of tactical capital reallocation, with greater tilt toward risk-free instruments and inflation hedging assets such as bullion,” Bhushan said.

A prolonged conflict could slow investment momentum in sectors that are heavily dependent on global supply chains or cross-border trade, as investors reassess geopolitical risks and macroeconomic conditions.

A Mumbai-based investment banker, who did not wish to be named, added that there could be some slowdown in ongoing deals in sectors that have a direct impact such as costs of input going up due to rising crude and gas prices and supply chain disruptions. But in the medium to long term things should come back to normal, he added.

“Businesses that are linked to the domestic consumption story, those stories should not see much impact, unless this conflict prolongs and rising prices lead to higher inflation leading to a downstream impact on consumer demand,” the banker said.

Despite these uncertainties, India’s large domestic consumption market and strong economic growth outlook are expected to continue attracting Gulf capital.

“It’s important to note that many capital-intensive sectors in India are backed by a strong domestic manufacturing and consumption story. So, India is likely to remain attractive for these funds, as overall risk premiums should still add up (vis-à-vis other sensitive geographies),” Bhushan added.