Iranian drone and missile strikes across the GCC are accelerating a shift in regional defense investment priorities. The UAE says it has faced more than 1k Iranian attacks — including over 800dronesand nearly 200 ballistic missiles — exposing the vulnerability of the region’s commercial hubs and energy lifelines.

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. An Iranian Shahed drone can cost as little as USD 20k-100k to manufacture, while the interceptor missiles used to take them down — including Patriot PAC-3 or Thaad — can run USD 3-12 mn per shot. The ongoing attacks also underscore how difficult it is to protect critical infrastructure without causing significant collateral damage.

“The cost asymmetry is stark and increasingly impossible to ignore,” Malcolm Lyne, director of defense and national security consulting at EY Middle East, tells EnterpriseAM. “This ratio is strategically unsustainable at scale, and UAE planners know it.”

Why you should listen to Lyne: Lyne advises governments across the region on defense strategy and national security industrial policy.

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 says, 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.”

“We’re seeing a global shift in doctrine,” Lyne said, noting that “Ukraine has provided arguably the most live data on this challenge.” On the battlefield, Kyiv has leaned heavily on electronic warfare and cheaper counter-drone systems rather than multi-mn-USD interceptors — exactly the kind of playbook Gulf militaries are now studying.

Israel’s air defense system is another example: “Israel’s layered air defense model — integrating Iron Dome for short-range threats, David’s Sling for medium-range, and Arrow for ballistic missiles — is being studied closely across the Gulf as a template for tiered, cost-calibrated response,” Lyne added.

The window spans both hardware and software — manufacturing what the industry calls counter-UAS (C-UAS) systems alongside interoperable software layers that allow radar, interceptors, and electronic warfare tools to coordinate in real time.

The good news: The UAE isn’t starting from scratch. It already operates what Lyne describes as “probably the most mature layered defense system across the GCC,” integrating platforms like Thaad, Patriot, and shorter-range C-UAS defenses. It’s also already orchestrating a major localization push for defense manufacturing and diversifying its supply chain with defense partnerships with countries across the world.

BACKGROUND- Abu Dhabi-based defense conglomerate Edge Group, created in 2019 by consolidating more than two dozen entities, has rapidly expanded into unmanned systems, electronic warfare, and loitering munitions. Subsidiaries including Halcon and Calidus are already producing export-ready platforms — early signals of a defense ecosystem designed not just to equip the UAE military but to compete internationally, Lyne says.

So what’s the problem? 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.

They also offer near-zero cost per shot once deployed. “Expect the UAE’s [Defense Ministry] to increasingly invest in directed energy weapons (lasers, high-powered microwave systems),” Lyne tells us.

The appeal is obvious: Lasers don’t run out of ammunition. Once powered, they can keep firing at a fraction of the cost of traditional interceptors.

The catch: Most directed-energy systems still require massive power supplies, which makes them difficult to deploy in mobile environments — and easy targets if rooted in place.

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.

Interoperability is key: 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 echoes 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.

Building the ecosystem

The UAE won’t be content with buying the technology — it will 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.

Procurement policy is reinforcing the shift: The UAE has also embedded some of the world’s most aggressive localization requirements into defense procurement, with major contracts typically requiring 60% industrial participation, Lyne notes. The Tawazun Council for Defense Enablement recently inked AED 3.6 bn in contracts, heavily skewed toward unmanned and advanced systems.

Still, building a serious defense industry takes time. “South Korea went from near-total import dependence in the 1970s to becoming a top-10 global arms exporter today — but that transition took 40+ years,” Lyne says. For most Gulf states, the realistic near-term ceiling is co-production and system integration, rather than fully indigenous weapons development.

A “golden” window

One likely path is focusing on the co-production of subsystems and system integration rather than building full platforms, Lyne notes.

Supply chains also need to remain diversified: Overreliance on any single partner is increasingly viewed as a strategic vulnerability, Lyne added — prompting governments to diversify defense relationships while building more capability at home. The UAE is already moving in that direction: Edge has linked up with partners across Qatar, Spain, Turkey, Ecuador, and Israel, while Abu Dhabi has inked defense partnerships with the US, India, and South Korea.

The bigger challenge is talent + experience: “The constraint is less financial and more about the defense industrial base: skilled engineers, sovereign supply chains, and decades of institutional knowledge,” Lyne tells us.

Innovation offers a window: Zeigler points to the US model — where nimble startups and “mini-primes” increasingly drive innovation alongside legacy contractors — as a potential roadmap for Gulf defense ecosystems. With several Gulf states now designated major non-Nato allies, the current geopolitical moment could open what he calls a “golden window for tech transfer.”