On 1 March 2026, the United Arab Emirates entered an economic phase unlike anything it had experienced over the previous four decades. Iran’s targeting of Jebel Ali Port became a genuine breaking point in the UAE’s long standing economic model, one built on open trade flows and uninterrupted connectivity. The image documented by Agence France-Presse of thick smoke rising from the port was not merely a wartime visual. It was a practical declaration that one of the Middle East’s most important trade hubs had been disrupted.
Jebel Ali Port is a cornerstone of the UAE economy. Its significance goes far beyond being the largest container port in the Middle East. It serves as a regional re export platform linking Asia, Europe, and Africa. Data indicates that the port handles around 15.5 million containers annually, connects to more than 150 ports worldwide, and contributes roughly 36% of Dubai’s GDP, according to the port’s operational figures.
According to estimates by Bloomberg, the port processes approximately $530 million in non-oil trade every day. That means any disruption, even if partial, translates immediately into daily losses worth hundreds of millions of dollars. In that sense, the strike did not merely hit infrastructure. It struck at the heart of the economic model that turned Dubai into a global re-export centre.
Tehran justified its attacks on the UAE by accusing it of allowing its territory or airspace to be used in operations against Iran, and by treating it as part of the American security architecture in the Gulf. Tehran also appears to have calculated that targeting key economic centres, rather than military sites alone, was an effective way to raise the cost of war for Washington and its allies, and to push Gulf states to pressure for a ceasefire.
Abu Dhabi, however, responded with a sharper tone toward Tehran than in previous years, when it had relied on de escalation. It announced its readiness to participate in international efforts to secure navigation in the Strait of Hormuz, marking a clear departure from the economic diplomacy approach it had followed since 2021, according to the Financial Times. Emirati officials, including Anwar Gargash, also stressed that any political settlement must include compensation for damage inflicted on civilian infrastructure, signalling the scale of the losses sustained during the first weeks of war.
The UAE government moved quickly to reassure markets and investors. The National Emergency Crisis and Disaster Management Authority said the situation remained under control, despite the temporary suspension of trading in financial markets, a move without precedent in the country’s history. Official data and media estimates indicate that within a single month, the UAE faced more than 2,000 missiles and drones, including hundreds of ballistic missiles, targeting sensitive infrastructure such as energy facilities, ports, airports, and urban districts.
A Blow to the Emirati Economic Model
Although UAE air defence systems intercepted the majority of these attacks, the operational and military cost of those interceptions ran into the billions of dollars. The indirect economic damage was even greater, driven by supply chain disruption and declines in trade and tourism activity. This reflects a shift in the strike’s effect from the military realm into the core of the Emirati economic model itself.
As military operations escalated across the region, trade through the Strait of Hormuz collapsed by around 97%, according to data from United Against Nuclear Iran. This had a direct effect on the UAE economy through what can only be described as a chain of accumulating losses. The damage did not stop at ports. It extended into free zones, supply chains, and trade linked financial activity.
The Jebel Ali Free Zone, home to more than 7,000 companies including hundreds of Asian and Chinese firms, faced disruption in sourcing and re export operations. According to Reuters, this led to the postponement of contracts worth billions of dollars.
Trade finance operations, which UAE based banks depend on heavily, were also hit as shipping activity declined, reducing the liquidity tied to international commerce. As thousands of ships were halted in the Gulf and shipments were rerouted along longer paths such as the Cape of Good Hope, transport costs rose sharply. That weakened Dubai’s competitiveness as a logistics hub and diverted part of its trade flows toward alternative centres.
Multi Billion Dollar Losses
At the aggregate level, estimates suggest that Gulf port revenue losses reached about $14.4 billion in just one month, based on compiled data from international energy and trade reports. Yet the UAE’s special vulnerability lies in the fact that its economy depends more heavily than its neighbours on non oil trade. That means the largest share of those losses was concentrated inside the UAE, particularly in Dubai.
Using the average daily figure of $530 million at Jebel Ali Port, a month of disruption implies losses of up to roughly $15 billion, without even counting indirect losses linked to supply chains, finance, and logistics services. These figures clearly indicate that the ports sector alone cost the UAE economy tens of billions of dollars in a single month.
Even more dangerous than the direct losses is the strategic shift the crisis has imposed on global trade routes. Companies have begun reassessing their reliance on the Gulf as a primary corridor. With risks in the Strait of Hormuz persisting, portions of trade have shifted to alternative routes, either through Africa or via ports outside the Gulf. This represents a long term threat to the UAE’s role as a global transit centre.
According to the Financial Times, even if that shift proves temporary, it could still trigger a redistribution of supply chains that reduces dependence on Dubai in the future. This means the loss is not only in present revenues, but also in future market share. That is what makes the crisis especially serious. It is no longer just a passing shock, but a real test of whether the Emirati economic model can withstand a deeply unstable regional environment.
The Collapse of Aviation and Tourism
The aviation sector in the UAE was among the industries hit most directly and most quickly, given its total dependence on air stability and international confidence. With the first strikes, Dubai International Airport, the world’s busiest airport for international passengers, experienced repeated disruptions and partial closures, leading to the cancellation of thousands of flights within days, according to official data.
As aerial threats continued, flight activity fell to unprecedented levels. The number of daily flights dropped from around 500 before the war to fewer than 100 on some days, according to flight tracking data. The impact was immediate on an economic model that depends heavily on transit traffic and international tourism.
Operational data shows that the most severe blow came from the collapse in travel demand to the UAE. In many cases, flights arrived nearly empty. Some inbound flights to Dubai reportedly recorded load factors of just 5% to 10%, while other planes from Europe and the United States returned carrying fewer than one fifth of their capacity, according to the Financial Times.
Outbound flights, by contrast, faced unusual pressure as thousands of residents and tourists sought to leave the country. This created a sharp imbalance in demand patterns and triggered a rapid decline in traveller confidence. In effect, the UAE temporarily lost one of its most important competitive advantages, its image as a safe destination and a global transit hub.
That sharp decline in aviation activity fed directly into the tourism sector, one of the pillars of Dubai’s non oil economy. According to data from Lighthouse Intelligence, hotel occupancy rates collapsed from around 90% during peak season to about 16% by mid March.
Major hotels were forced to close floors or entire buildings and offer heavy discounts to attract local demand. Hospitality companies also began cutting costs through unpaid leave and reduced working hours for staff, a clear sign that the sector had entered a real contraction phase.
Losses spread further into hospitality and leisure. Restaurants and shopping centres saw a marked decline in traffic due to the disappearance of tourists and reduced spending by residents. Some luxury retailers recorded revenue declines of up to 60% in the first weeks of war, while visitor numbers at major malls dropped by more than 50%.
At the regional level, estimates suggest the aviation and tourism sectors in Gulf states lost around $40 billion in one month due to airspace closures and flight disruption. Yet the largest portion of those losses was concentrated in the UAE because of its role as the region’s leading aviation and tourism hub, according to Reuters.
At the same time, the UAE saw an unprecedented surge in demand for departure. Evacuation costs soared. Private flights reportedly reached around $250,000 per family, while overland transport costs climbed into the thousands of dollars within days, according to the Financial Times. Reuters reported that this began to erode the UAE’s image as a safe and stable haven, as the departure of human and financial capital became a real possibility amid declining confidence and growing risk.
Financial Markets Under Stress
UAE financial markets posted sharp declines during the first weeks of war. Trading on both the Dubai Financial Market and the Abu Dhabi Securities Exchange was suspended for two days before activity resumed with significant losses. Dubai’s main index fell 4.7% in the first session, bringing its total weekly decline to roughly 9%, while Abu Dhabi’s index fell by more than 5%.
Shares in major companies such as Emaar and Etisalat also came under visible selling pressure, alongside partial foreign capital outflows, as investors reassessed the risks of exposure to the Emirati market. This coincided with the temporary disruption of some banking operations due to technical disturbances and the impact on data centres, further slowing financial activity during the early days of escalation.
In debt markets, risk premiums rose sharply on sukuk and real estate bonds issued by Emirati firms. According to Bloomberg data, some yields climbed to more than 1,000 basis points above benchmark rates, and several issuances entered distressed territory. This took place alongside a near total freeze in the primary issuance market since the start of the war, limiting companies’ ability to refinance at a time when real estate sector debt maturities are estimated at around $8 billion through 2030.
Real Estate Falls Back
The UAE real estate sector, especially in Dubai, experienced a sharp slowdown in the opening weeks of war. Deals worth hundreds of millions were either halted or renegotiated on weaker terms amid rising investor uncertainty, according to Financial Times estimates.
The newspaper reported that some buyers demanded discounts of up to 20% before completing transactions, while others withdrew from ongoing deals, particularly in projects linked to logistics areas such as Jebel Ali.
Market data also showed a noticeable decline in transaction volumes during March, alongside weaker demand from foreign investors who had been the primary engine of the property boom in recent years. If tensions continue, estimates point to the possibility of property prices falling by between 25% and 33%, representing a severe correction after price growth of more than 60% in recent years.
This downturn comes at a time when the real estate sector relies heavily on external capital flows and wealthy investors, making it especially sensitive to security and financial shocks. Slower sales and rising financing costs could also place pressure on developers, particularly those that depend on refinancing or off plan sales, increasing the risk that some projects could enter distress or face delays.
Malls Lose Their Crowds
The war also caused a sharp fall in shopper traffic across Dubai’s malls, a major marketplace for the global luxury goods industry. Amid attacks and logistical disruption, some retailers recorded revenue declines of up to 60%, with warnings that the downturn could persist for a prolonged period, according to the Financial Times.
Visitor traffic at major commercial centres in Dubai dropped sharply during the first three weeks of war. Bloomingdale’s, one of the emirate’s leading department stores, recorded a 45% decline in sales compared with the same period of the previous month.
At Mall of the Emirates, traffic at the luxury retailer Harvey Nichols fell even more sharply, down 57% since the war began. Sales in both centres during Ramadan, which ended on 19 March, were down by more than 60% compared with the same period last year.
Italian retailers operating in Dubai also reported sales declines of between 35% and 40% compared with pre war levels. According to one senior executive in the sector, the rising operating costs of luxury stores make them unprofitable without full scale activity, warning that a year round decline in tourist flows would amount to an extremely negative scenario.
Consumer spending remains one of the main drivers of Dubai’s economy. Wholesale and retail trade accounted for about 25.9% of the emirate’s GDP in the third quarter of 2025. Morgan Stanley estimates indicate that the Gulf region represents around 5% of global luxury industry revenues, with the UAE accounting for more than half of that share. The war has changed that reality.
Capital Begins to Leave
According to Bloomberg, many of Asia’s wealthiest families are rethinking their exposure to Dubai after the war shook a city that had attracted billions of dollars from across the region in recent years. Advisers told the agency that they are receiving calls from clients seeking to postpone relocation plans, while others are exploring ways to reduce their investments in a region once considered safe and stable. Those already based in Dubai are now drawing up contingency plans in case the unrest escalates.
Nick Xiao, chief executive of Hong Kong based multi family office Anom Capital, said that Asian investors who had moved toward the Middle East in search of investment opportunities and tax advantages are now rethinking those decisions and may move their money back to Hong Kong or Singapore.
Felix Lai of Hong Kong based multi family group JMS revealed that he arranged a private jet for 15 clients from Oman to Hong Kong within a matter of days at a cost of around $300,000. He added, “They do not even care about the price. They just want to leave.”
Although many of the people Bloomberg spoke to said they had anticipated only limited disruption before relocating, hearing explosions and watching drones and missiles being intercepted in the sky forced them to reconsider.
Jeffrey Sachs Warns the UAE
Prominent American economist Jeffrey Sachs said the UAE is making a major mistake by aligning itself with the United States and Israel in the ongoing war with Iran. In comments to India’s ANI news agency, he warned that if the UAE chooses to enter the war, its major cities, Dubai and Abu Dhabi, could face the risk of bombardment.
Sachs argued that Dubai and Abu Dhabi are not military zones but prime tourist destinations where wealthy visitors come to relax and enjoy themselves. Entering the war, he said, could turn those cities into direct targets.
He stated, “Quite simply, Dubai and Abu Dhabi can be bombed if the UAE enters the war. These are resort zones. These are tourist destinations. These are not places fortified by missile defences. These are places where the wealthy go to celebrate and invest their money. Entering a war zone means undermining the entire purpose of a place like Dubai. The UAE has placed itself in an absurd predicament, and it knows it. It is also continuing to escalate its position.”
Sachs added that the Abraham Accords, which made Gulf states including the UAE partners of the United States, were also a major mistake, describing the move as a fundamental miscalculation. He advised the UAE to focus more on protecting itself rather than relying on Washington to provide security from external threats.
He continued, “I do not want to be misunderstood, but the naivety of declaring yesterday that we will join America against the evil Iranians, and that we will continue fulfilling our commitment to pump trillions of dollars into the United States, enough. Protect yourself. Understand the situation. Do you think doubling down on a losing option is the right way forward now? But that is exactly what they are doing.”
Conclusion
After one month under sustained attack, the UAE’s losses appear to extend far beyond damaged infrastructure or temporary market volatility. The crisis has exposed the structural vulnerability of an economic model built on open trade routes, seamless logistics, safe skies, investor confidence, and the global branding of Dubai as a secure crossroads for capital, tourism, and commerce.
The most serious consequence may not be the tens of billions already lost in ports, tourism, aviation, real estate, finance, and retail. It may be the longer term strategic shift now underway, as trade routes, investment flows, and corporate calculations begin to adjust to a Gulf no longer seen as insulated from war.
