As the war in the Middle East heads into its second month, the rhetoric from the US against Iran has intensified, worsening the economic and global market fallout from the geopolitical crisis.

The headlines may paint a bleak picture, but there is notable positivity in the M&A space: Asia Pacific dealmakers with Middle Eastern ties aren’t calling it quits but are recalibrating and renegotiating terms, shows a report from Mergermarket.

The move suggests dealmakers may be better off blocking out the noise and executing transactions – particularly in critical sectors like oil & gas, renewables, and digital infrastructure.

Oil & gas: a consolidation game?

A big dealmaking roadblock in 2025 was the low oil price, hovering around US$65 per barrel. That dynamic has changed, with the Iran conflict and near closure of the Strait of Hormuz – a route for about a fifth of the world’s oil and natural gas flows – pushing Brent to above US$110 in early April.

The oil price crisis is acute, especially in fuel-dependent Southeast Asia. Naturally, energy security has become top of mind, and could fuel M&A as countries vie to secure reserves outside the conflict zone.

For example, China’s Five-Year Plan from October 2025 prioritized energy security and industrial upgrades, both of which are set to supercharge China M&A in the year ahead.

APAC businesses may also ramp up exposure to US energy supply to make up for the Middle East shortfall. Japan’s Mitsubishi Corporation’s planned US$7.5bn acquisition of US shale producer Aethon, announced this January, was a clear early signal. More US inbound deals from Asia could follow as countries diversify their oil supplies.

Time may also be ripe for renewed dealmaking in liquified natural gas (LNG). Last year was already a big one for US LNG M&A, but that momentum is set to shift to APAC this year as countries look more favorably at long-term LNG consumption to mitigate concerns around grid resilience and geopolitical risk.

State-owned companies and private capital eager to invest in yield-stable LNG assets will drive deal flow – provided the buy side and sell side can reprice risk and close valuation gaps.

Renewables: the next M&A hotspot

Asia’s dependence on Middle Eastern oil has been thrown into sharp relief amid the war. But instead of viewing the oil crisis as a time to revert to coal as some have indicated, there is an opportunity to fix structural gaps in energy planning, with a concerted push toward renewables.

The bet can pay off. Since the US-Israeli strikes on Iran started in late February, leading Chinese battery makers and energy storage technology companies added more than US$70bn collectively to their market capitalizations, suggesting investors expect this segment to rise in importance. Bankability will be key, but there are enough well-capitalized financial and strategic investors with appetite to pursue the right renewable targets at the right price.

Digital infrastructure holds its own

Renewables growth will also be important to support the rapid acceleration in digital infrastructure in APAC. The switch to 5G networks, the rise of AI, and the boom in data centers have caused a spike in power consumption, reiterating the need for more renewable energy sources to ease pressure on power grids.

The Middle East tensions are unlikely to derail focus digital infrastructure. But not all markets will fare equally. Tech companies that funneled billions into AI infrastructure projects in the Middle East over the years are now facing difficult questions as the conflict widens. Data centers in the United Arab Emirates and Bahrain have already been hit by Iran attacks.

This means inbound M&A in Middle Eastern data centers may pause until stability returns, and global hyperscalers could instead seek opportunities in some of Asia’s key data center hubs.

KKR and Singtel’s joint takeover of data center colocation services provider ST Telemedia Global Data Centres in early February is a clear example of the potential global private equity firms see in Southeast Asia. That interest will only grow as the region’s data center market matures and more deals emerge.

What’s next for M&A in these sectors?

Opportunities exist, but dealmakers will have to be selective, show pricing discipline and build geopolitical volatility directly into deal structures and modelling.

Tighter valuations, enhanced due diligence, and more robust material adverse change clauses will become standard. But if the conflict stretches further into the year, the M&A playbook will need a more fundamental rewrite – putting strategic fit and scenario-based valuation models front and center, while reviving deal flow in mission-critical sectors.

The current geopolitical shock is less a pause in dealmaking and more a redistribution of capital. Energy security, supply chain resilience, and digital infrastructure sovereignty will define the next phase of M&A in APAC, with capital flowing decisively toward assets that can withstand geopolitical fragmentation.