Gulf leaders write off 2026 as US-Iran war enters seventh month

Dubai airport passenger traffic falls 31% as hotels and real estate slump

The war between the United States and Iran entered its seventh month with Arab Gulf leaders writing off 2026 as an economic loss, according to people familiar with their thinking. Gulf leaders had entered the summer expecting the violent phase of the war to wind down in favor of long negotiations over Iran’s nuclear program, allowing a return closer to normal by the fall. Those hopes are now gone, the people said, with leaders expecting an extended period of low-level conflict and seeing no clear American path to bring the fighting to an end.

Dubai International Airport, typically among the world’s busiest, said passenger traffic fell 31 percent year-over-year in the first half of 2026, while cargo shipments dropped 29 percent in the same period.

Dubai’s real-estate index, which tracks publicly listed developers, had lost about a third of its value as of Thursday from just before the war. Residential sales fell 31 percent in the spring. Sales of luxury properties above $4 million were down 59 percent, according to a report from Betterhomes, a Dubai property brokerage. Walid Abou Sabha, a Dubai-based property consultant who is originally from Lebanon and moved to Dubai in 2023 amid a surge in real estate demand that followed the Covid-19 pandemic, said his monthly income had risen from around $2,000 in other Middle Eastern markets to $65,000 selling properties in Dubai. After Iran began firing on Dubai on the first day of the war, Abou Sabha said his sales in the early spring fell from seven a month to zero, though he said he expects the sector to rebound in a few years. “You cannot gamble against Dubai. Any time people did, they ended up losing,” Abou Sabha said.

Hotel occupancy rates fell to 56 percent in the first half of 2026 from around 80 percent in 2025, according to a report from Cavendish Maxwell, a Persian Gulf-based property consulting firm. Luxury and upscale properties faced the steepest declines. Average sales prices for residential homes rose 3 percent in the second quarter of 2026 from the same period a year earlier, according to Betterhomes. Hotel prices fell 7 percent in the first half from the same period of 2025, despite high vacancies. Airfares have remained high as competition dropped off and jet-fuel prices rose.

Many European and North American airlines — including Air Canada, KLM and Lufthansa — have extended their suspensions of flights to Dubai, in some cases until next year. Gulf-based airlines have continued to fly across the region, even using Iranian airspace. Their risk appetite is higher. Dozens of planes have landed at or departed Dubai International Airport within five minutes of warnings of missile or drone attacks, according to The Wall Street Journal.

Saudi Arabia, which has made a multibillion-dollar bet on videogames, moved the E-Sports World Cup from Riyadh to Paris, and Formula One canceled April’s race in the kingdom. The Bahrain Grand Prix remains on the calendar for October but is being held thousands of miles away in Malaysia. The Abu Dhabi Grand Prix is scheduled for December, though Formula One said that could change. A music festival headlined by Shakira in the United Arab Emirates this year has already been pulled. Companies are dealing not only with a lack of demand but also with shipping bottlenecks that have delayed deliveries of everything from heavy machinery to kegs of imported beer.

The UAE has worked to address the concerns of its business community, with high-ranking Emirati officials, who typically maintain a low public profile, meeting with investors and entrepreneurs. Dubai in the spring approved stimulus packages worth about $680 million. The measures allow for deferrals of, or exemptions from, some government fees, support for hotels and streamlined residency processes. The city is also handing out hundreds of dollars in tourist vouchers that include free tickets to water and theme parks, nearly half-price hotel stays at the Palm Jumeirah and three months of a premium food-delivery subscription.

Wynn Resorts, which is building the first legal casino resort in the UAE at a price tag of more than $5 billion, said the war has led to a monthslong delay in opening and has increased costs by hundreds of millions of dollars. “Look, I’m not going to tell you there’s no risk, but when we underwrote the project…we didn’t underwrite a region with zero geopolitical risk,” Wynn Chief Executive Craig Billings said on a call with investors in August. “We underwrote a country with a demonstrated ability to manage through it.”

Businesspeople in the hardest-hit sectors in Dubai are signaling that a recovery could be a long way off, even as the government has restricted information about war damage, stopped publishing some data and launched promotional campaigns to portray life in the emirate as back to its prewar best. An Emirati-hosted international golf tournament is set to take place in November. Musicians Hans Zimmer, Imagine Dragons and the Chainsmokers, as well as comedians Russell Peters and Trevor Noah, are scheduled to perform in the country before year’s end. But UAE officials acknowledge the war could again prove an impediment.

“When this thing ends, it is still going to take six months for things to start to feel normal again,” said Rafael Khanoyan, chief executive at UAE contractor Al Ryum Group, who said shipment backlogs and rerouted containers have sharply increased the price of imported goods. Alistair Paine, chief executive of Peninsula, a consulting company that helps international businesses establish operations in Saudi Arabia and the UAE, said prices would eventually succumb to the drop in business, though probably not until the end of the year. “There is a time effect to be realized here,” Paine said.

The crisis is making tourism less attractive as a counterweight to oil as Saudi Arabia works to reduce its reliance on hydrocarbons under Crown Prince Mohammed bin Salman’s Vision 2030 plan, said Neil Quilliam, an associate fellow at the international affairs think tank Chatham House in London. “Vision 2030 was already a bit on the rocks, and they were already changing their priorities,” Quilliam said. “There seems to be a push now away from the softer sides of the business goals, more toward industrialization,” he said.

Some countries in Asia are aiming to attract businesses leaving the Persian Gulf. Singapore in August announced a tax exemption for some investment profits earned by fund managers. Turkey in June introduced a 20-year tax exemption on certain foreign-sourced income for new residents and a reduced inheritance tax. Both countries already make it easier for residents to become naturalized citizens than Persian Gulf states, which have restrictive naturalization policies. “They are incentivizing companies to capitalize on what is going on in the Gulf,” Quilliam said. Companies that moved into the region seeking business opportunities, however, are wrestling with the reality that bureaucratic hurdles and punitive attitudes toward firms that leave could make it tough to return, Quilliam said. “It’s a balancing act,” he said.

“A state of neither war nor peace cannot be a sustainable solution,” Anwar Gargash, a senior Emirati adviser, said on social media this week.