US-Israel-Iran Escalation: The Playbook for LPs and GPs this Week
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The sudden escalation of the conflict between the US, Israel, and Iran has immediately reverberated across the Gulf, fundamentally altering the regional risk calculus. For private investors, family offices, and fund managers operating in the region, this geopolitical shock requires an immediate reassessment of strategies, liquidity, and portfolio resilience.
There is no doubt that the images of missiles and explosions across key Gulf hubs—such as Dubai, Abu Dhabi, Doha, and Riyadh—are extremely damaging. They put the region's hard-earned reputation as an unshakeable safe haven under the sternest of tests. These financial hubs have enjoyed a period of significant growth, with asset managers, GPs, institutional investors, and family offices flocking to the region to take advantage of the strategic positioning between East and West, favourable tax regimes, and untapped investment potential.
“The safe-haven image of the GCC in an otherwise volatile region is being shattered by a few Iranian missiles and drones hitting US military US bases, infrastructure such as oil refineries or symbolic targets such as diplomatic outposts. This narrative was built on the false assumption that firstly - decision-makers will choose restraint, and secondly - that geography has been abolished by tech and economic inter-dependencies."
Nicolas Michelon, Managing Partner, Alagan Partners
However, the unfolding events between the US, Israel, and Iran have placed many Family Office CIOs, Institutional Investors, and Fund managers in unfamiliar territory. So, what now? What should a fund head be prioritising? How should a family office principal approach the coming days?
In this environment, the distinction between general market participants and institutional-grade players becomes clear through their adherence to technical discipline over emotional reaction. Here is how to navigate the shockwaves.
“The priority is calm oversight. Review liquidity, confirm capital call coverage, and stay close to managers. This is a week for steady judgment, clear communication, and patience. Long term mandates remain intact”
Abbas Hashmi,Principal, Saudi Family Holdings
In response to these unprecedented developments, I have spent the week engaging in direct dialogue with LPs and GPs across the region to understand how they are navigating this unfamiliar territory. By gathering their real-time advice and strategic feedback, I have collated their insights into a practical checklist designed to support the Middle East alternative investment community through these challenging days. This guide aims to provide a clear, institutional framework for maintaining operational continuity and protecting capital in a rapidly shifting landscape, with on-the-record advice and support from Nicolas Michelon, Managing Partner of Alagan Partners and Abbas Hashmi ABFP®, Principal, Saudi Family Holdings.
The Short Term Impact on Private Markets
The immediate consequence for private markets across the GCC is a pronounced pivot toward defensive positioning and a necessary period of recalibration regarding capital deployment for large-scale investments. At the heart of this shift is a rigorous re-stress testing of core theses; investors are now forced to reassess the region’s commercial real estate and infrastructure outlooks as the post-rapprochement era of rapid economic diversification faces a stark test of resilience against heightened regional militarisation.
“We see two scenarios on the impact of capital flows. An optimistic scenario has the recent inflow of hot money start flowing out, as speculative investors have extremely low aversion to risk, especially the type of risk (geopolitical) they are unable to properly price. A more pessimistic scenario sees this outflow of hot money have a contagious effect on more structural money, the money that came in to finance the GCC’s transition policies in energy, infrastructure and economic diversification. The extent of this contagion, if it happens, will decide whether we are witnessing the end of a story, or just a bump on the road. The question within the question: are there credible alternatives out there?”
Nicolas Michelon, Managing Partner, Alagan Partners
This environment leads to a noticeable cooling of project appetites, with institutional investors proactively de-risking portfolios in anticipation of prolonged uncertainty. Consequently, the impetus for new, large-scale projects is likely to pause, particularly as elevated regional tensions threaten to keep the cost of borrowing high throughout the fiscal quarter.
We are already observing significant sector shifts in traditionally strong indicators of regional health, such as banking and real estate, where trading volumes have moved toward decidedly defensive positions. Conversely, the "geopolitical risk premium" will begin to favour providers of defence, cybersecurity, and critical infrastructure, which are increasingly viewed as essential hedges in a volatile landscape.
“Outside of the MENA region, the economies that have the most to lose are India, China, South Korea and Japan, the top 4 buyers of GCC energy and the world’s industrial powerhouses. Already, Asian stock markets are going through some of the most severe corrections since 2008 (KOSPI -12%) and the stocks that are the hardest hit are, quite counter-intuitively, not the industrials or logistics but tech such as Samsung, SK Hynix, Renesas. These names are becoming pure AI players and AI needs a lot of energy. Energy that is being prevented from sailing through Hormuz to reach Asia-Pacific markets. The question therefore is not so much the price of energy, rather than the mere availability of it. Finally, oil and gas derivatives are also coming under pricing and availability such as urea, sulphur, ammonia. This is pushing fertilizer prices higher, announcing significant food inflation and aggressive bidding for remain supply from the largest Asian buyers.”
Nicolas Michelon, Managing Partner, Alagan Partners
I’m an LP CIO. Now What?
For family offices and institutional LPs, this week is a test of institutional architecture. While retail markets may react to headlines, the disciplined CIO operates through a critical checklist designed to protect capital, manage downside risk, and ensure the "house is in order" for a potentially protracted period of friction.
The CIO’s Crisis Checklist
1. The Liquidity & Commitment Audit (The Denominator Effect) - The immediate priority is to quantify "Artificial Over-allocation." As public equity markets (Tadawul, DFM, and global indices) sell off, your private market exposure will mathematically spike as a percentage of your total AUM.
Action: Re-verify your unfunded commitment schedule for the next six months. Ensure you have the cash reserves to meet GP capital calls without being forced to liquidate long-term holdings during a temporary valuation trough.
“LPs are checking cash buffers, credit lines, and near term obligations. They are stress testing portfolios for higher energy, insurance, and logistics costs. Many are increasing the frequency of manager updates to avoid surprises”
Abbas Hashmi,Principal, Saudi Family Holdings
2. Physical Asset & Operational Due Diligence - With infrastructure in Dubai, Abu Dhabi, and Doha directly impacted by interceptor debris and strikes, "tail risk" is no longer theoretical.
Action: Contact your core real estate and logistics GPs for a site-level status report. Verify the activation of Force Majeure clauses and business interruption insurance across your highest-value regional assets.
3. Liability & Cash-Flow Containment - In a conflict scenario, the objective shifts from yield maximisation to solvency and "liability matching."
Action: Secure your private credit lines and verify the stability of your banking counterparties. Ensure the family office or institution has a "liquidity runway" of 12–24 months to cover all operational costs and private commitments, anticipating a potential "logjam" in fund distributions (DPI).
4. Portfolio "Sanity Check" vs. Core Mandate - In the heat of a crisis, the greatest risk is "mission drift."
Action: Review your Investment Policy Statement (IPS). Are your current defensive moves (rotation into gold or US Treasuries) a tactical hedge or a panicked departure from your long-term mandate? Maintain the "Patient Capital" philosophy that defines the most resilient family offices.
“Local GCC allocations continue to matter because proximity, familiarity, and operating control provide comfort in volatile periods. International exposure stays part of the portfolio, evaluated carefully within overall balance rather than as a directional shift. Capital moves with discipline and sequencing”
Abbas Hashmi,Principal, Saudi Family Holdings
5. Counterparty & Cybersecurity Review - Geopolitical conflict is increasingly fought in the digital and financial domains.
Action: Audit the cybersecurity protocols of your internal team and your third-party service providers. In a period of regional instability, the risk of data breaches or operational failures at the "middle-office" level is heightened.
6. Opportunistic Preparedness (The Recovery Plan) - Once the defensive perimeter is secure, the astute CIO prepares for the "Day After."
Action: Secure "Dry Powder" now. Identify the fundamentally sound assets that are being unfairly discounted due to regional proximity rather than fundamental failure. Prepare to deploy capital when the initial spike in investor fear begins to subside.
“A CIO's leadership is measured not during the bull runs, but during the "unknown unknowns." By focusing on downside protection and liquidity discipline this week, you are not just protecting a portfolio; you are ensuring the continuity of a multi-generational legacy”
Oliver Kirkbright, Co-Founder, Middle East Investor Network
I’m a Fund Manager. Now What?
In this environment, a GP’s value is no longer defined by capital deployment, but by operational intervention. You are no longer just an investor; you are a crisis-management partner for your portfolio companies and a clinical communicator for your LPs.
The GP’s Operational Checklist
1. Activate Portfolio "War Rooms" - The physical disruption to regional hubs (Jebel Ali, DXB, and Abu Dhabi) necessitates an immediate shift in logistics.
Action: Conduct a "Supply Chain Audit" for every portfolio company. For those dependent on the Strait of Hormuz, mandate the exploration of alternative land-bridge logistics through Saudi Arabia or air-freight contingencies. Audit current inventory levels to determine the "burn rate" if a total blockade extends beyond 14 days.
2. Execute Capital Call Diplomacy - LPs are currently navigating a liquidity crunch caused by the "denominator effect." Forcing a capital call right now for an aggressive growth project could permanently damage institutional relationships.
Action: Categorise all planned capital calls. Pause or delay non-essential calls. Prioritise "dry powder" for supporting existing portfolio companies that are facing soaring maritime insurance premiums (rising by 50%+) and energy costs.
3. Tactical Financial Hedging - With regional equity markets and currency pegs under scrutiny, you must protect the fund’s Net Asset Value (NAV).
Action: Deploy credit default swaps (CDS) and tail-risk options where appropriate to hedge against "known unknowns." Review currency hedges for any cross-border investments to ensure exposure to regional volatility is capped.
4. Stress-Test the "Cash Runway" - Inflationary pressure from energy spikes and shipping delays will hit margins immediately.
Action: Run a "Stress Scenario" for every portfolio company based on $100+ oil and a 30% increase in freight costs. Ensure each company has a sufficient cash runway to survive a 6-month period of regional friction without requiring a fresh injection of equity.
5. Establish a "Flash Reporting" Protocol - In a crisis, silence is interpreted by LPs as a lack of control.
Action: Issue a clinical, fact-based "Flash Report" within the next 48 hours. Avoid platitudes; instead, provide specific data on the physical security of assets, the status of key portfolio staff, and the specific mitigation steps being taken. Professionalism—not optimism—is what LPs value now.
6. Cybersecurity & Physical Security Audit - Geopolitical conflict often manifests in the digital domain, and regional offices may be in proximity to high-risk zones.
Action: Verify that portfolio companies have activated emergency cybersecurity protocols. For companies with physical sites near recent strikes, ensure employee safety protocols are active and that "Key Man" insurance/contingencies are in place for leadership teams.
“The best GPs distinguish themselves during the "down cycles." By transitioning from a growth mindset to an operational support mindset this week, you reinforce your position as a trusted steward of capital. You aren't just managing a fund; you are protecting an ecosystem”
Oliver Kirkbright, Co-Founder, Middle East Investor Network
No need to panic….
While the current environment is challenging, the GCC has navigated decades of volatility while successfully building world-class financial hubs. For the Middle East Investor Network community, this is a moment to prioritise discipline, transparency, and the long-term fundamentals that define the region’s growth story. This remains a chapter in a much larger book of regional development, not the conclusion.
A Final Note from the Editor
While the professional obligations and "playbooks" we’ve discussed are important for your portfolios, we know they can—and should—take a back seat in times like these. Our primary hope is that this analysis simply helps provide a bit of clarity and continuity during a week that feels anything but clear. We are a close-knit community at the Middle East Investor Network, and more than anything, we wish every one of you, your families, and your teams continued safety and security.
Stay safe, and we’ll be here to navigate whatever comes next alongside you.
Oliver Kirkbright, Co-Founder, Middle East Investor Network
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