Iran strikes: How Iranian strikes put Dubai’s reputation as a safe haven under pressure –

Dubai has long been the Gulf’s glittering safe haven amid the endless turmoil of the Middle East – a dazzling center of glamour, grandeur, towering skyscrapers and cloud-piercing skylines.

But recent shocks raise a stark question: Could this be so? “Pearl of the Gulf” Really safe anymore?The city – which attracts millions of tourists annually – is now on high alert, having been hit by retaliatory missile and drone strikes from Iran after joint US-Israeli strikes killed Supreme Leader Ayatollah Khamenei.

Over the decades, Dubai has cemented its position as the Middle East’s financial powerhouse, boasting a dazzling skyline, luxurious lifestyles, and an aura of impenetrable security.

But its skies now appear dangerously vulnerable to a rampaging and aggressive Iranian regime.Dubai’s appeal extends far beyond its skyscrapers and futuristic skyline. Tax-free salaries, ease of doing business, and promises of strict stability have reinforced the belief that any unrest in the Middle East or Gulf will never be able to pierce its bubble.But on Saturday, that perception changed. Iranian strikes entered Dubai’s airspace, targeting the world’s busiest airport for international travelers and even targeting the city’s iconic Burj Al Arab hotel, shattering the sense of invulnerability that had long defined the city.

UAE President Mohammed bin Zayed Al Nahyan initially called for calm, urging Tehran to “come to your senses” and remind the Iranian leadership that “your war is not with your neighbors.”

While Tehran may have calculated its response against the United States and Israel, it has continued its military assault on major cities in the United Arab Emirates, including the capital Abu Dhabi, the financial center Dubai, and nearby Sharjah, without limiting its strikes to Israeli or American military bases in the Gulf.The escalating situation in the region has become a major concern for millions of residents, including nearly 10 million Indians living across the Gulf.

Psychological impact and investor fears

The Iranian attacks not only caused physical damage, but also struck at the psychological foundation of a city that has spent four decades building a reputation as one of the world’s most reliable places to do business in a region known for instability.Authorities in the United Arab Emirates, a close ally of the United States, moved quickly to contain the damage to confidence as much as the physical fallout.

The UAE’s National Emergency, Crisis and Disaster Management Authority said the situation is still under control. For investors and residents who have watched their landmarks get hit by missiles and are stockpiling supplies, these reassurances have been noticed, but whether they are enough is another question.“It is difficult to overstate the risks facing Dubai’s economic model,” Jim Crane, a fellow at the Baker Institute at Rice University, told Reuters.

“The physical damage may be minor, and most of the pain so far is psychological. But Dubai’s status as a safe haven for expatriates and their businesses is increasingly in doubt. The longer the war drags on, the more the search for alternative locations will increase. Dubai needs to end this war now.”

Fast-moving international capital.In a reflection of the tension, UAE stock markets were closed on Monday and Tuesday.

The technology outage after the infection of Amazon’s cloud computing facilities affected some banking operations. Tens of thousands of people remained stranded, with airspace remaining largely closed.Dubai and Abu Dhabi have built their reputation as the “Switzerland of the Middle East” by attracting hedge funds, white-collar expatriates, and influential people drawn by sunny weather, modern infrastructure, and income tax relief. But now they are counting the number of interceptors remaining to defend against the Iranian missile barrage.

The UAE’s image as a safe haven is cracking.

Airports, flights and infrastructure in the Gulf were disrupted

According to a Bloomberg report, Dubai’s financial centers and tourist sites have been rocked since the weekend by fires and missile debris after defense systems intercepted 165 ballistic missiles, two cruise missiles and 541 drones from Iran. Supermarkets were filled with panicked buyers, and Dubai International Airport – the world’s busiest travel hub – was forced to close.

The Strait of Hormuz, a major trade and oil route on which the UAE and other Gulf states depend, is effectively closed. Despite Dubai’s proximity to Iran, the threat of war appears to have been underestimated, as evidenced by the constant influx of wealthy residents and rising property prices.The UAE has faced missile threats before, but this is a new level of danger. With the US-Israeli conflict with Iran now at their doorstep, the Gulf monarchies, despite their high defense budgets and hostility toward Iran, are struggling to manage external threats and public backlash.

Critical infrastructure, including desalination plants, shipping routes, and data centers, now faces real danger. The “stability first” model promoted by Gulf leaders is under serious pressure.Many Dubai residents drive to Oman or Saudi Arabia to secure flights outside the region. Airports in Dubai and Abu Dhabi, closed since Saturday, began to cautiously reopen late Monday, with a small number of repatriation flights.

Qatar and other Gulf airports remain largely closed after Israeli and US strikes on Iran sparked Iranian retaliation. More than 11,000 flights have been canceled since Saturday, affecting more than a million passengers, and airline shares, including British Airways, Lufthansa and Air France-KLM, have fallen sharply.

How did Dubai build its brand?

Dubai’s rise from a small pearling and fishing port to a global financial center has taken decades. The launch of Emirates Airlines in 1985, the opening of Burj Al Arab in 1999, and laws allowing foreigners to own property in the early 2000s were major milestones.Today, Dubai’s economy relies mostly on non-oil sectors, with oil accounting for less than 2% of GDP. Trade, tourism, real estate and financial services have replaced oil as major drivers, while Abu Dhabi, which owns more than 90% of the UAE’s oil reserves, remains more dependent on oil.The city’s success was based in part on instability elsewhere. With civil wars, uprisings and crises in the region, new residents and new capital flowed into Dubai.

The population of the Emirates has grown from One million people in 1980 to 11 million people in 2024, about 35% of whom are Indians. Dubai continues to attract wealthy residents, with more than 9,800 millionaires relocating last year, more than any other country, according to Henley & Partners.Launched in 2004, the DIFC hosts more than 290 banks, 102 hedge funds, 500 wealth management firms, and 1,289 family-related entities.

What changed on Saturday?

Weaknesses have always been there. The Strait of Hormuz extends near Dubai, and Iran has the motive and ability to destabilize trade in the Gulf.Over the weekend, Dubai International Airport was bombed, the pier at Jebel Ali Port caught fire, and the Burj Al Arab was damaged by interceptor shrapnel. Three people were killed and 58 injured, according to the UAE Ministry of Defense.

“People are afraid of what is happening. It is the first time they have had to hide in underground places.

“Dubai Airport, one of the largest airports in the world, should be closed for a few days,” said Nabil Mallali, multi-asset portfolio manager at Edmond de Rothschild Asset Management, who reduced his exposure to global stocks last week in preparation for a possible attack on Iran.“There is a 70% probability that we will maintain the geopolitical risk premium in the region for a long time.”Some companies have already begun planning layoffs, halting fundraising, and re-evaluating their presence in Dubai.

Demand for gold has risen, and private banks may reconsider customer service locally.“Historically, markets like the UAE have demonstrated resilience during crises, including the Covid crisis, supported by strong policy and governance response,” said Madhur Kakar, Founder and CEO, Elevate Financial Services. “At this stage, a large-scale structural reallocation of institutional capital away from the UAE or the Gulf region as a whole appears unlikely unless tensions escalate meaningfully or persist for an extended period.

““It’s really a very significant change in perceptions,” said William Jackson, chief emerging markets economist at Capital Economics. “Gulf economies were generally seen as safe from Iranian retaliation. I think (that) really changed over the weekend. The impact will depend on how long the conflict lasts, but this represents a very significant challenge, especially for diversification efforts in the region.”

Nearly 10 million Indians are at risk

Nearly 10 million Indians living across the Middle East face increasing risks as tensions rise in the wake of the US-Israel military operation against Iran and Tehran’s retaliation.

Prime Minister Narendra Modi described the situation in West Asia as a “matter of grave concern” and stressed that India supports dialogue and diplomacy to resolve disputes.

The Gulf hosts one of the largest overseas Indian communities: about 3.5 million in the UAE, 2.7 million in Saudi Arabia, 1 million in Kuwait, 800,000 in Qatar, 660,000 in Oman, and 350,000 in Bahrain. Smaller communities live in Jordan, Iraq and Israel. In the UAE, Indians make up approximately 35% of the population, working in construction, healthcare, finance and information technology.