(Bloomberg) -- Startups in the Middle East nearly doubled their fundraising in the first half of the year, defying a slowdown in venture capital investment in emerging markets brought on by economic uncertainty and investor caution.

About $1.35 billion in VC funding was funneled to companies in the Middle East from January through June, led by Saudi Arabia and the United Arab Emirates, according to data platform Magnitt.

Middle East activity was anchored by government support, new funds and mega deals for companies including Saudi Arabia’s newest unicorn, quick-delivery firm Ninja. AI commitments and deals also put the region at the “center of global investment momentum,” Magnitt said.

The haul stands in stark contrast to global emerging venture markets, where funding dropped to $3.98 billion — the weakest first half since 2017. The pullback was most acute in Southeast Asia amid uncertainty around interest rates, geopolitics and tariffs, according to the firm.

“Unless macro volatility eases significantly or inflation drops faster than expected, private capital flows into emerging markets will remain selective,” Magnitt said. “The most resilient EVMs will be those with strong local funding ecosystems, sovereign support and low exposure to external shocks.”

Saudi Arabia remains the powerhouse of VC fundraising in the Middle East, having raised more investment capital than any other country in the region for the third straight first half of the year. The kingdom saw over $245 million in new fund launches, with some backed by the Saudi sovereign wealth fund in a further sign of commitment to supporting startups at the state level.

Momentum across the Middle East was reinforced by US President Donald Trump’s visit to Saudi Arabia, the UAE and Qatar in May that resulted in a wide range of deals across sectors including aviation and AI, Magnitt said.

Fintech remained the favored sector across the broader Middle East and North Africa in the first half, with funding tripling year over year and startups focused on payments and lending dominating activity. Investor appetite returned to Series A and B funding rounds, according to Magnitt.

In mergers and acquisitions, the Middle East accounted for about 50% of deals across emerging venture markets, the highest share in two years, Magnitt said. That came as deal flow fell in Southeast Asia.

“The reversal highlights the fragile nature of recovery in EVM exit markets,” Magnitt said. “Unless macro volatility eases and financing conditions improve, M&A activity is likely to remain sensitive.”

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