The value of buyouts by private equity groups fell by more than a third in the first quarter of the year. In the three months to March, private equity groups agreed acquisitions worth $172 billion, a 36% drop from the prior quarter. Private equity sales have fallen by more than a third this year, as developments in artificial intelligence and war in Iran heap pressure on a subdued exit market.
Buyout firms were sellers in deals valued at about $103 billion in the first quarter, roughly 36% lower than the same period a year ago. This sharp decline follows a recent recovery in private equity and broader merger activity. The vast quarter-on-quarter drop in the value of buyout deals comes after a recovery in the second half of last year, with global deal value jumping to over $900 billion in 2025, driven by a handful of megadeals.
16 trillion in year-to-date 2026, marking the second-highest YTD total on record. That surge was led by OpenAI's $110 billion funding round, while megadeals valued at $10 billion-plus surged to 17 transactions totaling $414 billion, the highest YTD tally ever recorded. Buyout executives and advisers credited the drop in buyout activity to firms holding off signing deals due to market turmoil caused by the conflict in the Middle East.
-Israel military campaign in Iran has driven Brent crude above $113 per barrel, a 36% surge since late February. The war in Iran and the effective closure of the Strait of Hormuz have plunged global energy markets into deep uncertainty. Energy shipments from the Middle East have been at a standstill following Iran's threats to attack vessels that pass through a critical trade waterway as retaliation against US-Israeli strikes.
The blockade has led to a global oil shortage which has rocked Gulf-reliant Asian countries hard. Oil prices have at points soared to close to $120 a barrel. About a fifth of the world's oil passes through the Strait of Hormuz – around 20 million barrels each day.
Regional impacts are severe and widespread. Southeast Asia faces fuel shortages and rationing that threaten industrial activity. Europe is confronting soaring energy costs that strain households and industry, heighten inflationary pressures, and force policy trade-offs.
Africa grapples with higher fuel and fertilizer prices that exacerbate food insecurity. Conflict in the Middle East is pushing Bangladesh into another energy crisis, as it relies heavily on imported fossil fuels. Bangladesh's energy predicament is particularly acute.
4 million tonnes of crude oil through the Strait of Hormuz annually under long-term contracts with Saudi Aramco and Abu Dhabi National Oil Company. An Aramco cargo of 100,000 tonnes bound for Bangladesh is already delayed in the Gulf because of the war. Around 60,000 tonnes of the 293,000 tonnes of diesel planned for import in March have been deferred or cancelled, tightening domestic supply.
Furthermore, 75% of Bangladesh’s LNG imports come from Qatar, which suspended production and shipments following the outbreak of the war – including to Bangladesh. 23% of Bangladesh’s power plants are inoperable due to gas shortages. 1% of GDP, if oil, gas and coal prices remain high.
Financial markets have reacted sharply to the turmoil. 67%, marking a fifth consecutive weekly decline. 42%, its highest level since July 2025.
Within the private credit industry, investors have fled back to the safety of liquid assets, such as stocks and bonds, while others have retreated into cash and money market funds. Central bank policy is adjusting to the new inflationary landscape. 75% at its March 18 meeting.
The updated dot plot signaled just one rate reduction this year and another in 2027. 3% chance of a June rate cut. Beyond geopolitics, fears about artificial intelligence are disrupting investor sentiment.
Rising fears about the effects of AI on software groups have flattened hopes that private equity is recovering after its prolonged downturn. Software, one of the buyout industry’s more profitable sectors, has faced investors fleeing due to rapid AI growth, squeezing returns. Sentiment towards software has soured within the private credit industry amid investor anxieties that software and technology firms are uniquely vulnerable to being replaced or disrupted by AI.
In industry surveys, software easily repeated as the least favorable sector, with 69% of the vote. The private equity industry faces profound challenges with portfolio valuations and investor confidence. Some funds are reluctant to write down the value of their portfolio companies, many of which were purchased during the peak valuation boom of 2020 to 2021.
Some institutional investors have become skeptical of the market due to it lagging behind. The head of a large European buyout group warned that the worst of the economic impact of the war is yet to come, while the potential disruption to software groups’ business models could have an even greater impact on dealmaking in the next few months. Regional M&A performance shows a stark divide.
7 billion, supported by seven megadeals. 2 billion in YTD26, down 27 percent year-over-year. Market participants rank their top concerns clearly.
They ranked geopolitical turmoil/exogenous events (36%), tightening credit conditions (15%) and sourcing assets/M&A deal flow (14%) as the three most significant concerns for the loan market over the next six months. Healthcare Equipment & Services, Capital Goods, Commercial & Professional Services, and the Software & Services industries were seen as the most favorable credit investment opportunities. China's energy position is complex, blending vulnerability and self-sufficiency.
China uses an estimated 15 to 16 million barrels of oil daily. Gulf countries are a major source of the oil China ships in, with barrels from Saudi Arabia and Iran accounting for more than 10% of its imports each. Russian oil accounts for nearly a fifth of China's energy imports, making Moscow by far Beijing's biggest oil supplier.
However, China is also the world's largest coal producer, accounting for more than half of global production. The crisis is creating new opportunities for energy producers in the Western Hemisphere to expand production and attract investment. The private equity exit market showed mixed signals in the first quarter.
The value of global private equity exits in Q1 returned to the same levels from the same period last year. However, forty-four percent of respondents in a survey reported that AI-related investments accounted for less than 10% of their portfolios. The full extent of economic damage to private equity portfolios from AI disruption and Middle East conflict, along with the potential for a near-term recovery in private equity dealmaking and exits, remains unclear.