Agentic, Physical, and Sovereign AI: 2026 Predictions Shaping the Middle East

Artificial intelligence (AI) is advancing at an astonishing speed globally, reshaping industries, economies, and daily life. Among the most influential trends driving innovation and disruption are agentic AI, physical AI, and sovereign AI. These trends are not only transforming traditional markets but are also being actively shaped by ambitious national strategies in the Middle East, particularly in Saudi Arabia and the UAE, which are emerging as global leaders in AI adoption and innovation.

We gathered insights from AI leaders across industries worldwide¹ and incorporated a focused perspective on the Middle East, drawing on Deloitte’s recent research and partnerships in the region. 

Here’s a summary of these AI trends, why they matter, what people are saying, and early predictions for 2026 - with a special emphasis on the Middle East’s pioneering role.

1. Agentic AI: Autonomous intelligence driving business transformation

What is Agentic AI and why does it matter?

Agentic AI refers to autonomous, intelligent systems capable of adapting to changing environments, making complex decisions, and collaborating with humans and other agents. It enables organisations to automate dynamic, multistep processes, unlocking new business models and freeing human talent for higher-value work.

How can agentic AI be used?

• Customer service: AI agents triage and resolve support tickets, escalating complex cases to humans.
• Supply chains: Autonomous optimisation of inventory, logistics, and procurement in real time.
• Finance: Automated portfolio management, fraud detection, and compliance monitoring.

What are people saying about agentic AI?

Agentic AI adoption is still in the early stage. Most AI leaders and representatives surveyed indicated that their organizations are either in the pilot phase with limited deployment of AI agents or have not deployed agents at all. Very few have had a full-scale rollout of agentic AI currently. Those that noted moderate or significant deployment of agents generally represented larger organizations in tech-focused industries.

However, public sentiment is optimistic about the near-term implementation of agentic AI. Nearly half of LinkedIn respondents believed autonomous AI agents will significantly transform their organizations in the next two to three years. Less than 5% of LinkedIn poll respondents believed that Agentic AI would have no impact on their organization in this timeframe, with the remaining participants responding that agents will drive limited to moderate impact.

Middle East perspective: Accelerated adoption despite readiness gaps

Saudi Arabia and the UAE are at the forefront of Agentic AI adoption. According to Deloitte’s 2025 State of AI in the Middle East Report², over 80% of organizations in the region feel intense pressure to adopt AI, with 69% planning increased investment. Consumer adoption is also high, with 58% of UAE and Saudi consumers using generative AI tools, significantly outpacing UK and European markets.

Deloitte Middle East’s launch of the Centre of Excellence for Oracle AI Agents in October 2025 exemplifies regional commitment to scaling autonomous agents securely and responsibly. However, challenges remain; nearly half of organizations cite talent shortages and insufficient technological capabilities as barriers to scaling Agentic AI. This “perfect storm” of high investment and readiness gaps requires strategic approaches to ensure effective deployment.

Key Challenges: Error propagation and business risk

Dr Aleksei Minin, head of Deloitte AI Institute, highlights that error propagation in multi-agent systems is a critical risk. Errors from one agent can cascade, leading to operational risks, trust erosion, and scalability constraints. Robust validation, error detection, and human-in-the-loop safeguards are essential for enterprise-grade reliability.

Three early predictions for 2026 in the Middle East 

I. Government deployment scales: AI can reduce manual workloads by 30% in government ministries, with full-scale rollouts expected as data maturity improves.

II. Arabic-optimized agents proliferate: Localised AI solutions for tasks like information lookup, email editing, and translation will surge.

III. Industry-specific solutions commercialise: AI models tailored for sectors such as energy, finance, and healthcare will move rapidly to market.

2. Physical AI: Intelligence in the real world

What is Physical AI and why does it matter?

Physical AI integrates AI with robotics, autonomous vehicles, IoT, and digital twins to enable machines to sense, interpret, and act in the physical world. It unlocks efficiencies and improves safety in sectors where automation was previously limited by complexity or cost.

Uses of Physical AI

• Manufacturing: Robots and AI-powered quality control reduce defects and downtime.
• Logistics: Autonomous vehicles and drones streamline deliveries and warehouse operations.
• Healthcare: Wearables and smart sensors enable real-time patient monitoring and adaptive therapies

What are people saying about physical AI?

The majority of AI leaders surveyed predicted minimal to moderate usage of physical AI in the next two to three years within their organizations. The speed of adoption of physical AI technology is highly dependent on sizable barriers, including stringent safety and security requirements, as well as the substantial costs associated with hardware deployment and ongoing maintenance. Additionally, challenges such as regulatory compliance, integration with existing infrastructure, workforce readiness, and public acceptance further impact the widespread implementation of physical AI solutions.

General population LinkedIn respondents indicated more varied opinions about how physical AI may impact company operations in the next two to three years. More than a third of respondents expected minimal impact from Physical AI. However, more than 50% expected moderate to significant impact. Just over 10% of respondents did not expect Physical AI to affect their organization’s operations at all. Skepticism over the impact of this technology is likely shrinking. Early impacts of physical AI are apt to affect some industries faster than others as well.

Middle East Perspective: From framework to implementation

Deloitte’s Physical AI 6Ps framework guides organizations in the Middle East through skills evolution and readiness. The October 2025 Deloitte-KAUST partnership is advancing AI applications in asset-heavy sectors like manufacturing, logistics, energy, and government services, where positive ROI is compelling.

Workforce transformation is critical. Organisations must rethink job design, reskilling pathways, and safety protocols as AI enters physical workplaces.

Three Early Predictions for 2026 in the Middle East: 

I. Public sector pilots scale: Physical AI will transition from demonstrations to operational deployments in government services.

II. Skills-based training accelerates: Continuous learning in AI and digital literacy will become essential as traditional job models evolve.

III. Governance standards mature: Regional standards for physical AI safety and security will be established, supported by initiatives like the Deloitte-IBM AI Governance Centre of Excellence.

3. Sovereign AI: Governance as a competitive advantage

What is Sovereign AI and why Does it matter?

Sovereign AI ensures data, model weights, and compute resources remain within national or regional boundaries, addressing privacy, regulatory, and geopolitical concerns. It builds trust with customers and partners and reduces dependency on foreign technology providers.

Potential impact of Sovereign AI

• Healthcare: Local processing and storage of patient data to comply with privacy laws.
• Finance: Transaction data and AI models remain within national borders for regulatory compliance.
• Public sector: Government AI systems improve transparency and local control.

What are people saying about sovereign AI?

AI leaders agreed that data residency constraints and compute considerations are important to strategic planning for their organization – though the level of importance of Sovereign AI varies across industries. The urgency rises significantly in highly regulated sectors, such as banking and insurance, life sciences and health care, energy and industrials, and telecommunications. In these sectors, strict rules, highly sensitive information, critical-infrastructure status, IP considerations, and even national security concerns make local control over data and models imperative.

Unsurprisingly the broader LinkedIn community also viewed sovereign AI as a top strategic consideration. With a steady stream of headlines — ranging from cross-border data-privacy disputes and high-profile cyberattacks to looming EU regulations — there are clear signals that data controls and compute infrastructure are rapidly becoming board-level concerns.

Middle East Perspective: Regulatory frameworks and economic value creation

The UAE’s Charter for AI development and Saudi Arabia’s AI Adoption framework exemplify the region’s commitment to ethical AI use, privacy, and compliance. The Abu Dhabi Data Enablement Program enhances data maturity and governance, enabling scalable AI solutions.

GCC governments generate vast data volumes and invest in unified platforms to break down silos and enable AI-driven decision-making. Sovereign wealth funds are evolving from passive investors to strategic architects of the AI economy.

Privacy remains a concern, with one in four consumers citing it as a top AI issue. Regulatory safeguards will be key to adoption.

Three early predictions for 2026 in the Middle East: 

I. Data maturity drives readiness: Centralized data registers will enable effective AI deployment.

II. Ethics frameworks become enforceable: Saudi Arabia and UAE will move from voluntary ethics guidelines to enforceable regulations.

III. Regional governance standards emerge: Shared frameworks for ethics, transparency, and accountability will enable responsible AI at scale.

Strategic imperatives for the Middle East

Talent remains the paramount constraint for AI growth in the region. Partnerships with KAUST and Mohamed bin Zayed University of Artificial Intelligence focus on preparing the next generation through education, workshops, internships, and exchanges. Organizations investing in local AI talent development will secure strategic positions in one of the world’s fastest-growing AI markets.

The future of AI in 2026 is shaped by Agentic AI, Physical AI, and Sovereign AI globally, with Saudi Arabia and the UAE leading the charge in the Middle East. These nations are not only adopting AI technologies rapidly but are also setting governance frameworks and investing strategically to harness AI’s full potential. Increased efficiency, productivity, innovation, and robust safeguards will define the AI landscape, with the Middle East playing a pivotal role in this transformation.

We will continue to monitor these trends and share updated predictions in future reports.

1. Three New AI Breakthroughs Shaping 2026: AI Trends | Deloitte US

2. State of AI in the Middle East | Deloitte Middle East