DUBAI — For years, the United Arab Emirates has branded itself as a sanctuary for international commerce amidst the turmoil of the Middle East. Now, this reputation is being challenged as regional conflicts press harder against its borders, testing the resilience of its economic strategies like never before.
The UAE, maintaining close ties with both the United States and Israel, has found itself a primary target during the latest conflicts, enduring more missile and drone strikes from Iran than any other nation. These hostilities, coupled with Iran’s control over the Strait of Hormuz, have dramatically slashed the nation’s crude oil and natural gas exports. Additionally, the country’s tourism and conference industries have taken a significant hit.
Situated directly across the Persian Gulf from Iran, the UAE has projected an air of calm even as it implements substantial changes. Recently, it unveiled plans for a new pipeline aimed at minimizing its dependency on the strait. Furthermore, it has exited the OPEC oil cartel to enhance its energy output over the long term, a move that had been contemplated even before the current conflict.
Though the war was initiated by the U.S. and Israel, the UAE finds itself deeply entangled. The risks remain evident, as highlighted by a recent drone attack on its Barakah nuclear power plant, casting a shadow over the fragile ceasefire.
Despite the economic disruptions brought on by the conflict, the Emirates’ substantial financial reserves have, for now, prevented significant job losses or a withdrawal of international businesses. However, the prolonged nature of this standoff threatens the UAE’s carefully cultivated image, which is crucial for attracting global business and investment.
Emirati officials have increasingly accused Iran of engaging in piracy and even terrorism, while also hinting at potential military responses to the ongoing provocations.
The UAE “will not tolerate any threat to its security and sovereignty under any circumstances,” its Foreign Ministry said Sunday night. “It reserves its full, sovereign, legitimate, diplomatic, and military rights to respond to any threats, allegations or hostilities.”
UAE’s ruling family directs a more aggressive foreign policy
It’s hard to know how the UAE will respond to the Barakah attack, which caused no radiological release and hasn’t stopped the nuclear plant in Abu Dhabi’s far western desert from operating.
The UAE is a federation of seven autocratically ruled sheikhdoms, including Dubai and Abu Dhabi. Its top ruling body is the Federal Supreme Council, comprised of the hereditary rulers of its seven emirates. But decision-making is dominated by Abu Dhabi’s Sheikh Mohammed bin Zayed Al Nahyan and his family.
The ruling family, analysts say, has directed a more aggressive foreign policy in the last decades, including entering the war in Yemen against Iranian-backed Houthi rebels. The UAE helped bring Egyptian President Abdel-Fattah el-Sissi to power in 2013, and is alleged to have sent arms to parties in Sudan and Libya’s civil wars, which it denies.
Sheikh Mohammed, who rarely speaks publicly, gave his only brief remarks on the war for state media while visiting those wounded by Iranian attacks at a hospital in March.
“The UAE is attractive, the UAE is beautiful, the UAE is a model. But I say to them: do not be misled by the UAE’s appearance,” the sheikh warned at the time. “The UAE has thick skin and bitter flesh; we are no easy prey.”
But that doesn’t mean there has been no pain.
Economic warning signs
The closure of the Strait of Hormuz has impeded the UAE’s ability to sell crude oil and natural gas, though a few of its tankers have made it out. It can export approximately 1.8 million barrels of crude a day through a pipeline to Fujairah, a city with an oil terminal on the Gulf of Oman outside the strait. The Emirates is trying to speed up the construction of a second pipeline to double that capacity.
The UAE’s tourism and conference market — estimated to be more than 12% of its economic output — has also been hit hard.
Since the war started Feb. 28, over 70 scheduled events in the UAE have been postponed, canceled or otherwise affected, according to Northbourne Advisory, a communications firm based in Qatar that’s been tracking the effects of the war. The Emirati government did not issue a blanket ban for events, but organizers likely changed their plans over “insurance withdrawal and liability exposure,” the firm said.
On May 4, the country’s airline, Emirates, announced it had resumed nearly its entire schedule of flights out of Dubai International Airport, the busiest worldwide for years for international travel. But the same day, Iran launched multiple drone and missile attacks, setting off alerts on mobile phones and groans among the Emirates’ business community, which is eager to return to some sense of normalcy.
The airport appears to be building a protective cage around its jet fuel tanks, something officials there declined to discuss.
Hotels, including Dubai’s iconic, sail-shaped Burj Al Arab, have closed for renovations as occupancy rates have fallen to around 20%. Moody’s Analytics estimates that rate will fall to 10% in the June quarter, down from 80% before the war.
Moody’s warned that occupancy rates will likely stay down through the rest of 2026, with travelers likely to remain hesitant even after hostilities subside.
In an analysis published on Monday, the Institute of International Finance said: “Dubai’s openness makes it vulnerable to shocks in travel, logistics, and confidence, while Abu Dhabi’s balance sheet and energy assets give the federation the capacity to absorb the blow.”
Coin-operated fighter jet art
Dubai in particular has been trying to show it is still open.
This past weekend, Dubai hosted an abbreviated version of its annual Art Dubai show. The war felt close by, not only because the show’s preview happened the same day Iran seized a ship anchored off Fujairah.
One piece of art was a coin-operated black fighter jet, covered in pairs of black Nike tennis shoes.
One artist, Solimán López of Spain, came with a piece centered on the idea of him claiming ownership of a metal-rich asteroid that’s the target of a NASA mission. The artwork is meant to reflect on how countries and companies extract oil and other commodities.
The conflict made it a challenge to attend with his work, he said. “But I said I have to do my best, because I do believe that it’s the perfect context to talk about this in the region,” he said.
Another artist, Alfred Tarazi of Beirut, noted his grandparents lived through two world wars.
“Life doesn’t stop in a world war,” he said. “We can only counter a narrative of violence with culture.”
