How Iran’s strikes are putting Dubai’s ‘safe-haven’ reputation under strain – The Times of India

Dubai has always been the Gulf’s glittering safe haven amid endless Middle East turmoil — a dazzling hub of glamour, grandeur, towering skyscrapers, and a skyline that pierces the clouds. But recent shocks raise a stark question: Is the “Pearl of the Gulf” truly secure anymore?The city — drawing millions of tourists yearly — now stands on high alert, battered by missile and drone strikes from a vengeful Iran after joint US-Israeli strikes killed Supreme Leader Ayatollah Khamenei.For decades, Dubai cultivated its status as the Middle East’s financial powerhouse, flaunting dazzling skylines, luxurious lifestyles, and an aura of impregnable safety. But now, its skies look perilously exposed to a rampaging and aggressive Iranian regime.Dubai’s allure stretched far beyond its skyscrapers and futuristic skyline. Tax-free salaries, seamless business ease, and vows of ironclad stability fostered a belief that no Middle East or Gulf turmoil could ever pierce its bubble.On Saturday, that perception changed. Iranian strikes entered Dubai’s airspace, targeting the world’s busiest airport for international travellers and even aiming at 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 “go back to your senses” and reminding the Iranian leadership that “your war is not with your neighbours.” While Tehran may have calculated its response against the US and Israel, but continued its military offensive on key cities in the UAE, including the capital Abu Dhabi, the financial hub Dubai, and nearby Sharjah, not 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 concerns

Iran’s attacks not only caused physical damage but also hit the psychological foundation of a city that had spent four decades building its reputation as one of the world’s most reliable places to do business in a region known for instability.Authorities in the UAE, a close ally of the US, moved quickly to contain the damage to confidence as much as the physical fallout. The UAE’s national emergency, crisis and disasters management authority said the situation remained under control. For investors and residents seeing their landmarks hit by missiles and stockpiling supplies, these reassurances were noted, but whether they were enough is another question.“It’s hard to overstate the peril for Dubai’s economic model,” Jim Krane told Reuters, a fellow at Rice University’s Baker Institute. “The physical damage may be slight, and most of the pain thus far is psychological. But Dubai’s status as a safe-haven for expatriates and their businesses is in increasing doubt. The longer the war continues, the more intense the search will be for alternative locations. Dubai needs this war to wrap up now. International capital is highly mobile.”Reflecting the strain, UAE stock markets were closed on Monday and Tuesday. Tech outages following a hit to Amazon’s cloud computing facilities affected some banking operations. Tens of thousands of people remained stranded as airspaces stayed largely closed.Dubai and Abu Dhabi built their reputation as the “Switzerland of the Middle East” by attracting hedge funds, white-collar expatriates, and influencers, drawn by sunny weather, modern infrastructure, and zero income tax. But now, they are counting the number of interceptors left to defend against Iran’s missile barrage. The UAE’s image as a safe haven is cracking.

Airports, flights, & gulf infrastructure disrupted

According to Bloomberg report, since the weekend, Dubai’s financial centres and tourist spots have been shaken by fires and missile debris after defence systems intercepted 165 ballistic missiles, two cruise missiles, and 541 drones from Iran. Supermarkets were swamped with panic buyers, and Dubai International Airport—the world’s busiest travel hub—was forced to shut down.

The Strait of Hormuz, a key trade and oil route on which the UAE and other Gulf countries depend, is effectively closed. Despite Dubai’s proximity to Iran, the risk of war seems to have been underestimated, shown by the continued inflow of wealthy residents and high property prices.The UAE has faced missile threats before, but this is a new level of danger. With the US-Israel conflict with Iran now reaching their doorsteps, the Gulf monarchies, despite their high defense budgets and hostility to Iran, are struggling to manage both external threats and public reaction.

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 have been driving to Oman or Saudi Arabia to secure flights out of the region. Airports in Dubai and Abu Dhabi, closed since Saturday, began cautiously reopening late Monday, with a few repatriation flights. Qatar and other Gulf airports remain largely closed after Israeli and US strikes on Iran sparked Iranian retaliation. Over 11,000 flights have been canceled since Saturday, affecting more than 1 million passengers, and airline stocks, including British Airways, Lufthansa, and Air France-KLM, have fallen sharply.

How Dubai built its brand

Dubai’s rise from a small pearling and fishing port to a global financial center took decades. The launch of Emirates airline in 1985, the opening of the Burj Al Arab in 1999, and laws allowing foreigners to own property in the early 2000s were key 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 the main drivers, while Abu Dhabi, with over 90% of the UAE’s oil reserves, remains more dependent on oil.The city’s success was partly built on instability elsewhere. With civil wars, uprisings, and crises in the region, new residents and capital flowed into Dubai. The UAE’s population grew from 1 million in 1980 to 11 million in 2024, with Indians making up about 35%. Dubai continues to attract wealthy residents, with over 9,800 millionaires relocating last year, more than any other country, according to Henley & Partners.The Dubai International Financial Centre (DIFC), launched in 2004, hosts more than 290 banks, 102 hedge funds, 500 wealth management firms, and 1,289 family-related entities.

What Saturday changed

Vulnerabilities have always existed. The Strait of Hormuz runs close to Dubai, and Iran has both the motive and the capability to destabilize Gulf commerce.Over the weekend, Dubai International Airport was hit, a berth at Jebel Ali Port caught fire, and the Burj Al Arab was damaged by interceptor fragments. Three people were killed and 58 injured, according to the UAE ministry of defence.

“People are afraid of what’s happening. It’s the first time they have to hide in underground places. Dubai airport, one of the biggest in the world, has to shut down for a few days,” said Nabil Milali, multi-asset portfolio manager at Edmond de Rothschild Asset Management. He reduced exposure to global stocks last week to prepare for a possible attack on Iran.“There’s a 70% probability we will keep a geopolitical risk premium on the region for a long time.”Some firms have already begun planning layoffs, halting fundraising, and reassessing their presence in Dubai. Demand for gold surged, and private banks may reconsider serving clients locally.“Historically, markets like the UAE have demonstrated resilience during crises, including Covid, supported by strong policy response and governance,” said Madhur Kakkar, founder and CEO of Elevate Financial Services. “At this stage, a broad structural reallocation of institutional capital away from the UAE or the wider Gulf appears unlikely unless tensions escalate materially or persist for an extended period.”William Jackson, chief emerging markets economist at Capital Economics, said, “It’s really quite a big change in perceptions. The Gulf economies have generally been seen as safe from Iranian retaliation. I think (that) has really changed over the weekend. The impact will depend on how long the conflict continues, but this is quite a big challenge, particularly for diversification efforts in the region.”

Nearly 10 million Indians in danger

Nearly 10 million Indians living across the Middle East region face heightened risks as tensions escalate following the US-Israel military operation against Iran and Tehran’s retaliation.

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

The Gulf hosts one of the largest overseas Indian communities: around 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 roughly 35% of the population, working across construction, healthcare, finance, and IT.