The US newspaper The Wall Street Journal published a report highlighting aspects of the economic crisis hitting the Gulf due to the U.S.–Iran war, to the extent that leaders consider 2026 to be completely written off, according to the paper. Meanwhile, business figures state that returning to normal conditions will require about six months after the war ends due to the backlog of rerouted shipments and containers.
Most importantly, according to the report’s conclusions, “the deepest blow is not merely the decline in tourism, but the erosion of the Gulf’s credibility as a stable zone capable of insulating its economy from wars.” The continuation of a state of “neither war nor peace” disrupts events, investment, and planning even when direct strikes do not occur, because companies price in the probability of risk, not just actual damage.
According to the report, sources familiar with the thinking of Gulf leaders stated that they have abandoned hopes for economic recovery during the autumn and now regard 2026 as a lost year. These leaders expect a prolonged low-intensity conflict, with the United States lacking a clear path to end the war.
The report noted that Gulf estimates early in the summer leaned toward fighting subsiding and the start of lengthy negotiations over the nuclear program, which would have allowed economic activity to resume.
The WSJ report also noted that the Dubai government has restricted information regarding war damages and halted the publication of certain data, alongside a campaign to portray life as normal. It pointed out that the Wynn project—the first legal casino resort in the UAE—incurred months of delays and hundreds of millions of dollars in cost overruns.
The resort’s baseline cost exceeds $5 billion, making the delay an indicator that the war’s impact has spilled over into major strategic projects.
According to the same report, Neil Quilliam points to a potential Saudi shift away from “soft” economic sectors such as tourism and entertainment, toward manufacturing and physical production.
Quilliam also warns companies wishing to leave the Gulf about bureaucratic hurdles and punitive stances that could make their future return more difficult.
Relocation of Gulf Events
In this context, the report highlighted that the Bahrain Grand Prix scheduled for October was moved to Malaysia instead of being canceled outright. Saudi Arabia relocated the Esports World Cup from Riyadh to Paris, and the Saudi Formula 1 race scheduled for April was canceled.
The Abu Dhabi race remains scheduled for December, but Formula 1 management has kept the possibility of changing it tied to security developments. Additionally, an Emirati music festival featuring Shakira as a headliner was canceled among a series of events that lost their commercial or security viability.
Aviation, Tourism, and Hotels
The report stated that European and North American airlines, including Lufthansa, KLM, and Air Canada, have extended their suspension of flights to Dubai, in some cases until 2027.
Furthermore, passenger traffic at Dubai International Airport dropped 31% during the first half of 2026 compared to the same period last year. Air cargo shipments at the airport fell 29%, showing that the crisis has impacted Dubai’s logistical function alongside tourism.
Hotel occupancy plummeted to 56% in the first half of the year, down from nearly 80% during 2025, with luxury hotels being the hardest hit. Despite high vacancy rates, hotel prices declined by only 7%, while airfares remained elevated. The WSJ noted that persistent high prices alongside collapsing demand indicate that the market has not yet undergone price correction, which consultants expect to materialize toward the end of the year.
Real Estate in Dubai
Regarding real estate, the report stated that the index for listed real estate developers in Dubai lost about a third of its value, and residential real estate sales fell 31% during the spring. Sales of properties exceeding $4 million dropped by 59%. Meanwhile, average residential sales prices rose 3% year-over-year in Q2, revealing that prices are lagging behind the collapse in transaction volumes. This divergence may indicate that owners and developers are still refusing to cut prices, rather than representing a recovery in real estate demand.
Shipping and Supply Chains
In this context, businesses are facing demand shortages and maritime bottlenecks that have delayed the arrival of products ranging from heavy machinery to imported beverages. Rerouting containers and congestion have driven up the prices of imported goods, while corporate sensitivity to any new round of escalation in the Strait of Hormuz has doubled.
Dubai’s Response
In the spring, Dubai approved stimulus packages worth approximately $680 million to stem the decline in tourism.
The packages included deferring or waiving certain government fees, supporting hotels, and simplifying residency procedures.
The emirate is distributing hundreds of dollars in tourism vouchers that cover free entry to water and theme parks, as well as discounted stays on Palm Jumeirah.
Benefiting Competitors
In August, Singapore announced a tax exemption on certain investment profits earned by fund managers, targeting mobile capital.
In June, Turkey introduced a 20-year tax exemption on certain foreign income for new residents, along with a reduction in inheritance tax.
Source: WSJ