The Iran conflict, which escalated in the second half of Q1, triggered a 22.5 per cent quarter by quarter decline in deal value and a 12.4 per cent drop in deal count across European private equity, according to PitchBook data.
Public markets fell 5 per cent to 10 per cent in response, and while private-market valuations have yet to fully adjust, a correction is expected absent a near-term resolution.
The closure of the Strait of Hormuz and the resulting upside risk to energy prices and inflation have placed central banks in a “holding pattern”, according to PitchBook, leaving European PE caught between the momentum of a strong H2 2025 and an increasingly risk averse market.
However, on 7 April a two-week ceasefire in the war between Iran and US-Israeli forces was agreed upon, leading to a reopening of the Strait, which could have a future positive impact on market activity.
The UK & Ireland region also recorded its best quarter since Q3 2023, with €26bn in exit value. In a further encouraging sign for UK private-market liquidity, the country recorded its first-ever transactions on PISCES, a world-first regulated platform allowing private companies to open time-limited share trading windows without a full public listing.
By contrast, France posted its worst quarter since Q2 2020.
When it comes to UK legislation, the PitchBook report also cast a critical eye over current debate on the mandation clauses within the Pension Schemes Bill, which is yet to become law.
The report says: “Until the bill receives Royal Assent, pension funds have little incentive to accelerate their private markets allocations ahead of legislative clarity, and in a market already navigating geopolitical headwinds, that hesitation is unlikely to be short-lived.”
PE fundraising remains subdued globally, with just 23 funds closing in Q1 and €18bn raised YTD. Constrained LP distributions, the denominator effect, and lagging megafund performance relative to public markets have all weighed on activity, according to the PitchBook report.