Before the Iran war, 40,000 shipping containers a day moved through Jebel Ali port, the sprawling deep-water complex that powered this city-state’s rise from a Gulf backwater to an international powerhouse, The Wall Street Journal reported. Now just 1,000 containers pass by the largely vacant docks. Port officials are racing to ramp back up to prewar traffic, but the reality, they said, is that it will take at least a month. As MSI reported in March, Iranian airstrikes struck Dubai International Airport and other sites, shaking the emirate’s long-standing haven image. That article is available here.
Emirati officials say Dubai is already recovering. “Whoever thought they could strangle the U.A.E.’s economy was ignorant of its very nature,” Sheikh Abdulla bin Mohamed bin Butti Al Hamed, head of the Dubai Media Office, told the Journal. “It is a global center of gravity that cannot be besieged, disrupted or opposed by any party.”
The government’s financial position provides a significant cushion. The U.A.E.’s sovereign-wealth funds, managing over $1.8 trillion in assets, allow the country to avoid external borrowing and inject liquidity into the domestic economy. The government has announced a flood of new projects and assistance programs since the ceasefire.
That cushion, however, sits beneath an economy whose core engines have stalled.
The property market, which was at all-time highs before the war, is stagnant. Transactions plunged 80%, said Abdullah Alajaji, chief executive of the real-estate brokerage Driven Properties. Before the war, half of all sales were “off plan”—investors bought unfinished apartments or homes years in advance expecting values to rise. Those sales have almost collapsed, he said. With European tourists staying away, a large source of first-time buyers has disappeared. Some residents—mainly Indians, Russians, Chinese and Emiratis—are bargain shopping for investment properties, with prices down 10% to 15%.
“People are watching to see if this is lasting, will it stick?” Alajaji told the Journal. “We’re expecting continued volatility.”
Hotel occupancy rates have plummeted well below normal off-season levels. At the Fairmont Hotel on the Palm, where an Iranian drone struck near the front entrance on the first day of the war, almost all signs of damage are gone, but the guests are not. Instead of the customary 60% to 70% occupancy rate in off-season June, the hotel is less than 40% full, the manager said. Rooms were recently available for $146 a night.
At the Atlantis resort, also on the Palm Jumeirah, more than 700 hotel employees were laid off during the war—around 10% of the staff—a person familiar with the decision told the Journal. The hotel said it would try to help them find jobs elsewhere, but for many workers the move means their employment-linked visas are canceled and they must return to their home countries.
The war prompted many residents to flee and some have not returned. Ria Karapataki, a Cyprus native who had lived in Dubai for 15 years and co-owned a high-end property-renovation company, told the Journal she panicked when war broke out. “I thought Dubai was over.” The family took refuge first in Scotland, then in Cyprus.
When her sons tired of being away, they returned to their apartment on the Palm on April 17, a week after an initial ceasefire was announced. Her company is having trouble obtaining building supplies because of the shutdown at Jebel Ali, but she said that is temporary. None of the renovation projects begun before the war has been canceled.
Other residents have returned since the ceasefire, but the aftershocks are still being felt. A financial-sector executive told the Journal the war accelerated her timetable for leaving Dubai. She said a huge sovereign-wealth fund and tightly knit Emirati elite mean outsiders are always competing against the government. She is seeking a U.S. visa, hoping to move to New York.
“Generally, those who’d arrived more recently were the ones who left,” said Jeremy Savory, a British resident whose company helps clients secure second passports and overseas residency. “Those who have been around for a while are incredibly bullish.”
Dubai is also adapting its infrastructure. With cargo ships blocked from Jebel Ali, the smaller ports of Khor Fakkan and Fujairah on the Gulf of Oman coast have become an unexpected lifeline. Truck traffic there surged during the conflict, and officials have announced plans to expand those ports to reduce vulnerability to another blockade of the Strait of Hormuz.
The city has weathered downturns before. The 2008 financial crisis burst Dubai’s real-estate bubble, forcing a bailout from Abu Dhabi. When the Arab Spring protests broke out a few years later, Dubai benefited as investors looked for a haven. It experienced one of the fastest global recoveries from the Covid-19 pandemic.
But some signs of strain remain. A beach and concert venue popular with expats, Barasti Dubai, announced it was closing for renovations until next year. The Burj al Arab, the city’s famous sail-shaped hotel, also closed for renovations after it was targeted by an Iranian attack in February.
“People are still going to restaurants, meetings are happening,” Alajaji told the Journal. “But there will be scar tissue.”