Bank M&A slowed to a crawl after start of the Iran war

• Key insight: Bank M&A was poised to maintain its strong pace in 2026, but geopolitical tensions and a fresh bout of economic concerns put a damper on deals during the first six months of the year.
  
• Expert quote: "Once you have volatility and uncertainty, buyers pull back." — Laurie Havener Hunsicker, analyst at Seaport Research Partners
  
• Forward look: M&A trends for the rest of the year are shrouded in uncertainty, as tensions between the U.S. and Iran once again rise. 
  

Bank mergers and acquisitions, after ramping up during the second half of 2025, were expected to accelerate this year, supported by lower interest rates and a friendlier regulatory environment.
But the U.S.-Israeli attacks on Iran put a damper on deals, as some potential buyers and sellers chose to remain on the sidelines amid escalating geopolitical tensions and economic worries.

The result was a slowdown in the number of tie-ups announced during the first six months of the year compared with the prior six months, as well as a decline in deal values and pricing.

Eighty-three transactions were announced between Jan. 1, 2026, and June 30, 2026, down from 117 deals announced between July 1, 2025, and Dec. 31, 2025, according to a recent report from Seaport Research Partners. Deals announced before Feb. 28, when the attacks in Iran began, made up 87% of the total deal value for the first half of this year, the report said.

"That was an important moment," Laurie Havener Hunsicker, an analyst at Seaport Research Partners, told American Banker. "Once you have volatility and uncertainty, buyers pull back."

Deal value for the first six months of 2026 was $17.4 billion, according to Hunsicker. From March through June, deal value totaled only $2.3 billion, reflecting fewer and smaller transactions.

Last year was the strongest year for bank M&A since 2021, with 188 total deals announced and a combined deal value of $50.5 billion, according to Hunsicker's research. Those figures, which exclude M&A deals involving credit unions and other nonfinancial institutions, overwhelmingly surpassed 2024, when 128 deals were announced, with a combined deal value of $16.5 billion.

The acceleration happened largely during the second half of 2025, with several high-profile deals involving regionals. The list of buyers included two Ohio-based banks — Fifth Third Bancorp in Cincinnati and Huntington Bancshares in Columbus — as well as Pittsburgh-based PNC Financial Services Group and Columbia Banking System in Tacoma, Washington. Two other regionals, Pinnacle Financial Partners and Synovus Financial, became a single company.

Faster regulatory approval times, courtesy of loosened standards under the Trump administration, and declining interest rates were major factors in more deals coming together.

Data from KBRA Financial Intelligence shows that all bank deals announced during the first half of 2025 have since closed, reflecting the quicker approval times by regulatory agencies.

At the start of this year, Hunsicker and other bank analysts were predicting that the momentum of 2025 would carry over into 2026 and continue building. In early February, the largest deal announcement so far this year  — the pending $12.3 billion acquisition of Northeast regional Webster Financial by the Spanish banking giant Banco Santander  — lifted expectations that bank M&A would indeed be strong throughout the year.

The favorable M&A environment was projected to result in "a busy few years for consolidation," Ebrahim Poonawala, an analyst at Bank of America Securities, said in a research note on the day that Santander announced it would buy Connecticut-based Webster. He cited the "pragmatic regulatory backdrop (shorter deal approval timelines) and … the need for low-cost core deposits."

Days after the Iran war began, however, some analysts changed their tunes. In a March 9 research note, Hunsicker said deals were "poised to stall" or come together at a discount due to rising geopolitical and stagflation fears. Prior to Feb. 28, she noted, year-to-date total deal values were tracking ahead of 2025.

Now, two weeks into the second half of 2026, it's anyone's guess what might transpire over the rest of the year. Following an interim peace agreement in June, the U.S. and Iran have resumed attacks and appear to be heading toward more conflict. On Monday, President Trump said on social media that the U.S. would reinstate a blockade on Iran to prevent its ships from entering or leaving the Strait of Hormuz, the critical oil passageway in the Middle East.

Expectations for regional bank M&A deals are high, under the premise that a more favorable regulatory landscape will smooth the way for larger banks to make larger deals, and accounting for the risk that such a landscape will fade after the 2028 presidential elections. 

Hunsicker is optimistic that M&A activity will pick up. In June, after the U.S. and Iran agreed to a memorandum of understanding to negotiate reopening the Strait, she said in a research note that she expected deals to "substantially accelerate" in the back half of this year and throughout 2027.

Still, ongoing volatility will likely impact deal prices, she told American Banker. Potential buyers "may be hunkered down," while potential sellers won't secure a premium sale price, she said.

"I think there's absolutely a pent-up demand to do deals, and now you have a faster regulatory approval process, so from that standpoint the landscape is favorable," Hunsicker said. "You just need to have an easing of geopolitical tensions … and the Strait of Hurmuz opening, but depending on what day we're talking about, it looks like that's happening or it's not happening."