Iranian drone and missile strikes across the GCC will violently accelerate a shift in regional defense investment priorities. With Saudi Arabia fighting strikes on the Ras Tanura refinery and near Prince Sultan Air Base, and the UAE having faced so far as many as 500 one-way attack drones, the vulnerability of commercial hubs and energy lifelines is fully exposed.

In other words: The shooting war isn’t over, but investors in the defense industry already see the development of what amounts to a new asset class.

The problem: Traditional air and missile defense systems work, but they cost a fortune compared to low-cost asymmetric swarms. Firing a USD 3 mn interceptor at a USD 20k drone just doesn’t work in the long-term. The ongoing attacks also underscore how difficult it is to protect critical infrastructure without causing significant collateral damage.

The investment thesis: Look for plenty of capital to pour into smaller, more mobile anti-drone systems that rely on lasers and microwaves. The potential is in both hardware and software: manufacturing what the industry calls “counter-UAS” or “C-UAS” systems will focus on both the weapons themselves and so-called interoperable software layers that allow armed forces to knit defense systems together.

The asymmetric threat

“Every defense ministry on the planet is having the same conversation right now,” MasnaVentures CEO Lucien Zeigler tells EnterpriseAM. Strikes across the Gulf are the culmination of a threat that operators and defense technologists have been tracking for years. “What we're witnessing is a stark wake-up call that the future of warfare is drone-first,” Zeigler said, adding that while the war in Ukraine brought drone warfare to global feeds, the 2019 attacks on Saudi Arabia’s Abqaiq and Khurais facilities were “the opening chapter.”

Why you should listen to Zeigler: He’s the chief executive of Saudi’s first-ever defense venture capital fund.

The core issue today is that civilian infrastructure is struggling to defend against “lower threshold Group 3 drone attacks,” Principal Investor at Cosmic Capital Natasha Ahmed tells us. While regional partners have an adequate supply of interceptor missiles, they are the wrong tool for the job, Ahmed argues.

SOUND SMART- When defense operators talk about “Group 3” drones, they aren't talking about off-the-shelf commercial quadcopters or massive, high-altitude military aircraft. Group 3s sit in the middle: They weigh anywhere from 56 to 1.3k lbs, fly under 18k ft, and cruise at speeds up to 250 knots.

Iran’s Shahed-136 is the poster child for this class: They’re cheap enough to be deployed in massive, swarming barrages but carry explosive payloads heavy enough to cripple critical energy and civilian infrastructure.

It only takes one: Even with high interception rates, the sheer volume of attacks changes the equation. “Here’s the brutal math: it only takes one or two out of a 100 getting through to cause real damage, real disruption, real impact on a population or an economy,” Zeigler says.

Drones turned the GCC’s entire economic footprint into a frontline. Beyond traditional oil and gas targets, the USD 20k-a-pop munitions are being used to hit commercial logistics and tech infrastructure, including Amazon data centers in the UAE and Bahrain, the oil port of Fujairah, and maritime facilities in Oman's Duqm and Salalah ports.

Air defenses that don’t suck for people on the ground

Defending civilian centers requires what industry players call “low collateral mechanisms” — a euphemism for ways of knocking drones out of the sky without relying on ammunition or missiles. Companies in the sector are now heavily focused on layered defenses that integrate so-called non-kinetic options.

Uhm, Enterprise? What’s a “non-kinetic option” in normalspeak? Think lasers and other “directed-energy” weapons. Think lasers that burn drones out of the sky and high-powered microwaves that fry their robot brains mid-flight.

There’s surging investor interest in lasers and directed energy, which offer a near-infinite capacity to fire (they don’t need to reload) at a fraction of the cost per shot. The drawback is that current systems aren’t particularly mobile — they need massive power sources to operate. Being rooted in place makes them easy targets.

The way forward: The next 5-10 years will see investors pour money into developing “more mobile and efficient systems that are smaller in size,” according to Ahmed.

For a firm like Masna, the priority is strictly hardware manufacturing, as “scale is superiority on the battlefield” in this new threat environment, Zeigler says.

BUT- Hardware alone won't solve the problem. Investors are eyeing the “coordination and orchestration of counter-drone” systems, specifically the “interoperability piece, the software layer that would allow regional partners to collaborate,” Ahmed notes. Zeigler echoed this, while acknowledging it’s too early to say what happens next. “What is clear is that the threat environment now demands it. [...] When your neighbor is intercepting the same drone family that just hit your oil facility, the conversation about shared early warning systems and C-UAS collaboration stops being theoretical,” according to Zeigler.

The financial momentum backing this shift is huge. The global C-UAS market is projected to skyrocket in value from roughly USD 5.12 bn in 2025 to nearly USD 25 bn by 2032, driven almost entirely by the rapid growth of drone threats and the need for mitigation and neutralization systems.

A “golden” window

Saudi Arabia won’t be content with buying the technology — it’s going to want to own it, and so will others. “In the region, I think the demand signal won’t just be, ‘sell us counter-drone systems.’ It will be, ‘help us build, sustain, and eventually export this capability ourselves,’” Zeigler says.

The push for local manufacturing is fundamentally about “allied industrial resilience,” especially as the Pentagon openly acknowledges that the US defense industrial base was not designed for the production volumes demanded by the new face of warfare, Zeigler says.

To bridge this gap, the Kingdom is looking to build a localized defense ecosystem driven by private capital. Pointing to the US model — where nimble startups and “mini-primes” increasingly drive innovation alongside legacy contractors — Zeigler notes that our recent designation as a “major non-Nato ally” opens a “golden window for tech transfer.”