For a city that markets itself as a paradise of sunshine, luxury shopping and architectural spectacle, the experience of living under missile attack is a nerve-stretching one.
Since early March, Dubai and the wider UAE have found themselves under regular Iranian missile and drone strikes as the war between Iran, Israel and the US spreads across the Gulf. Interceptor explosions and emergency alerts have become part of the daily routine in a city better known for beach resorts and business conferences.
The contrast is jarring. Dubai has long presented itself to the world as the region’s ultimate safe haven—a neutral commercial hub, the ‘Switzerland of the Gulf’—where geopolitics are kept carefully at arm’s length from trade and finance. For decades that reputation has been one of its greatest economic assets.
The events of the past fortnight are testing that image more severely than at any point since the emirate’s rise as a global business centre.
The stakes are considerable. Although Dubai’s own oil production today contributes only a small fraction of its GDP, the emirate sits at the heart of one of the world’s most important energy ecosystems.
Just down the E11 highway lies Abu Dhabi, one of the largest oil producers in the world and home to ADNOC, a company that plays a central role in global crude markets. Dubai itself hosts a dense concentration of energy traders, oilfield services firms and regional offices for IOCs.
It is also a critical energy logistics hub. Jebel Ali port—the largest container port between Singapore and Rotterdam, which accounts for an estimated 25% of Dubai’s GDP—handles huge volumes of petroleum products and energy-related trade. Nearby sits the Jebel Ali refinery, while the Dubai Multi Commodities Centre is home to a growing number of energy trading firms.
Two hours drive from Dubai to the Arabian Sea coast, the emirate of Fujairah has become one of the world’s largest oil storage and bunkerage centres, with storage capacity estimated at 70m bl, serving as a vital refuelling point for ships crossing the Indian Ocean.
Taken together, the UAE represents a dense concentration of strategic energy infrastructure—from offshore oil and gas facilities to storage terminals, ports and pipelines designed to keep global energy markets supplied.
In addition, there are obvious geopolitical targets: American military facilities near Abu Dhabi, naval logistics operations in Jebel Ali and other defence installations across the country, as well as the storage tanks in Fujairah.
Against that backdrop, the performance of the UAE’s air defence systems has been widely praised. Officials say that more than 95% of incoming missiles and drones have been intercepted before reaching their targets. At the time of writing, the death toll remains mercifully low—four fatalities, mostly caused by falling debris rather than direct impacts.
Yet the images seen around the world have been somewhat different.
Media attention
Television footage carried by some Western outlets has focused heavily on scenes of nervous expatriates and influencers at airports and crowded highways, all seeking to escape the country. Dubai policymakers privately fear that such images—however exaggerated—could prove damaging to the emirate’s carefully cultivated reputation for stability.
The immediate economic impact is already visible. Hotels that would normally be full during peak tourism season have reported sharply reduced occupancy and slashed rack rates. Footfall in malls has fallen significantly, and restaurateurs speak anecdotally of revenues down by as much as half.
Real estate transactions have also slowed markedly. Property agents report deals running at roughly 50% of the pace seen before the outbreak of hostilities.
Economists are attempting to quantify the impact. Analysts at Capital Economics estimate that the conflict could lead to a contraction of GDP by up to 15% in the worst-case scenario.
Much will depend on the fate of the Strait of Hormuz.
The narrow waterway, through which roughly a fifth of the world’s oil normally flows, has effectively become a conflict zone, with insurance costs soaring and commercial shipping increasingly reluctant to transit the passage. For the Gulf’s trading economies, the disruption has immediate consequences.
Jebel Ali’s role as a major re-export hub for goods moving across the Arabian Peninsula is heavily dependent on smooth maritime flows. Several businesses based in the port have already reported severe logistical disruptions, forcing them to reroute shipments via the eastern port of Khor Fakkan—a workaround that adds both time and cost.
Abu Dhabi is somewhat better protected thanks to the Habshan–Fujairah pipeline, which allows some crude exports to bypass Hormuz entirely. But that infrastructure cannot absorb all the oil normally shipped through the strait, leaving large volumes effectively stranded.
The implications extend far beyond the UAE. Roughly a fifth of the world’s crude oil normally passes through the Strait of Hormuz, along with a significant share of global LNG exports from Qatar. When that artery is disrupted, the shock reverberates instantly through global energy markets—from Asian refineries dependent on Gulf crude to European utilities scrambling for alternative gas supplies.
In that sense, the missile alerts sounding across Dubai are not simply a local security issue. They are a reminder that the stability of the Gulf remains central to the functioning of the global energy system.
Another casualty of the conflict could be the long-standing commercial relationship between Dubai and Iran.
For more than a century, the city has hosted a large Iranian business community, many of whom have been central to its trading culture. Even during periods of tight international sanctions, Dubai remained an important conduit for goods moving to and from Iran.
That relationship now looks increasingly fragile. With Iran’s economy devastated by the ongoing conflict and political tensions running high across the Gulf, many local traders believe the era of commercial engagement may be drawing to a close.
Within Dubai’s business community there is also a palpable sense that the war itself was avoidable. Many local executives view the conflict—which erupted in the middle of diplomatic efforts between Washington and Tehran—as an unnecessary escalation. Suspicion of Israel’s role in pushing the confrontation has also been widely voiced in private conversations.
Whatever the politics, the economic consequences are now unavoidable.
The question facing Dubai’s leadership is whether the emirate can once again demonstrate the resilience that has defined its modern history.
There are precedents. The global financial crisis of 2009 was widely seen as an existential threat to Dubai’s economic model. Yet the emirate emerged from that period with a more disciplined approach to debt and public finances.
More recently, the Covid-19 pandemic delivered another shock to the tourism-driven economy. Dubai responded aggressively and ambitiously, reopening early and introducing a range of policies designed to attract businesses, investors and remote workers back to the city.
Whether similar measures will now be required remains an open question. Policymakers could consider targeted support for affected businesses, adjustments to construction schedules to avoid oversupply in property markets, or new incentives aimed at restoring investor confidence once the security situation stabilises.
Dubai has always thrived on reinvention, but the emirate faces one of the most serious tests of its reputation as the Middle East’s safe haven. The coming months will determine whether that reputation—carefully built over decades—proves as resilient as the city itself.
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