Cooling Middle East tensions could support private equity deal activity, says Blackstone’s Baratta

A potential de-escalation of geopolitical tensions in the Middle East may help revive private equity dealmaking momentum in 2026, according to a report by Bloomberg citing comments by Joe Baratta, global head of private equity at Blackstone Inc.

Speaking in a television interview, Baratta indicated that recent instability – particularly linked to conflict involving Iran – has weighed on investor confidence and risk appetite, largely due to its impact on global energy markets. Signs of easing tensions, however, could begin to improve conditions for transactions.

Markets responded positively to news of a temporary ceasefire between the US and Iran, with equities rising and oil prices declining, although uncertainty persists given ongoing regional flashpoints.

Beyond geopolitics, Baratta pointed to artificial intelligence as another major driver of recent market volatility. Rapid advances in AI—highlighted by developments from Anthropic—have raised concerns about disruption across sectors such as software and professional services, where private equity firms maintain significant exposure.

The resulting uncertainty has weighed on listed alternative asset managers, while technology-focused investors including Thoma Bravo and Vista Equity Partners have moved to reassure stakeholders over portfolio resilience.

Despite these concerns, Baratta dismissed more pessimistic views on the long-term outlook for software. He emphasised that technological shifts typically create both winners and losers, while also enabling existing businesses to improve efficiency through AI adoption.

The industry continues to face structural headwinds. Exit activity remains subdued, with firms holding elevated levels of unsold assets after several years of weaker distributions to investors. Fundraising has also declined, reflecting a more challenging macro environment.

Baratta noted that addressing the backlog of ageing portfolio companies will be a key priority, with sponsors ultimately needing to pursue exits via public listings or sales at realistic valuations in order to return capital to investors.