In the space of just three decades, Dubai has built itself into one of the world’s major financial hubs – a magnet for global banks, investors and wealthy expatriates. But the war in the Middle East is testing that success, raising questions about whether the flows of capital, trade and tourism that fuel its economy can hold if the conflict spreads.
The emirate is not only a symbol of luxury and spectacle, it has also become a key centre for finance and international commerce in the Gulf, attracting companies and wealthy individuals from around the world.
Dubai’s economic model is unusual in the region. Unlike several of its neighbours, its prosperity is not built mainly on oil. Instead, Dubai has focused on services, tourism, global trade and financial activity, strengthening its position as the main financial hub serving the Middle East, Africa and South Asia.
At the heart of that strategy is the Dubai International Financial Centre, which opened in 2004 and now hosts more than 8,800 companies including international banks, investment funds, law firms and wealth management firms.
Stability at risk
Dubai’s rapid rise as a financial centre has rested on two main pillars: favourable taxation and business-friendly regulations that attract foreign companies, and the stability the emirate has long projected in a region often marked by geopolitical tensions.
That sense of security is now under strain as the war threatens the flows of trade, tourism and investment that Dubai depends on.
The city itself has begun to feel the impact of the conflict. Drones and missiles have struck infrastructure in Dubai, including its airport, where a nearby drone strike sparked a fire at a fuel tank facility and disrupted flights.
Kharg Island, the fragile oil lifeline behind Iran’s war economy
The United Arab Emirates briefly closed its airspace early on Tuesday as a precaution on the back of missile and drone threats. Meanwhile debris from intercepted drones reportedly struck buildings in Dubai’s financial district.
Beyond the immediate damage, such incidents risk weakening the confidence that underpins international finance.
“It’s hard to overstate the peril for Dubai’s economic model,” Jim Krane, a fellow at Rice University’s Baker Institute for Public Policy, told Reuters.
The longer the conflict continues, he warned, the greater the risk that investors will begin looking for alternatives.
'If the Strait of Hormuz were to remain closed, we would face a major crisis'
No exodus yet
So far, however, there has been no large-scale departure of capital or financial workers. Expatriates employed in the finance sector have not left in significant numbers.
Some companies have taken precautionary steps, including bringing employees home or allowing staff to work remotely. But no widespread panic has taken hold so far.
If the conflict drags on, however, the situation could change.
Dubai’s difficulties could create opportunities for other financial centres in the region. Saudi Arabia, for example, is trying to position Riyadh as an alternative economic hub. However, with most Gulf countries affected by regional tensions, this reduces their relative appeal.
Wealth managers in Singapore told Reuters that several Dubai-based clients had begun exploring transfers of assets to the city-state as geopolitical tensions rise.
For now, however, advisers say many investors are following developments closely and taking what one wealth manager described as a “wait and watch approach”.
With reporting by newswires and partially adapted from this story in French.
