Dubai's image as a financial hub faces its biggest test yet

Dubai has built a reputation as an oasis of stability in the volatile Middle East region. 

The United Arab Emirates' second-richest emirate positioned itself as a secure financial hub where high-net-worth individuals could park capital, run businesses and plan for the long term with confidence.

That carefully built image, however, has been shattered by the Iran war.

Iranian missile and drone attacks on Gulf targets triggered a sharp economic shock, with the stock markets in Dubai and neighboring Abu Dhabi initially losing $120 billion (€103 billion) in value.

At the same time, tourism cratered and hotel occupancy dropped to 20% from the usual 70 to 80%, and flights to and from Dubai International Airport plummeted by around two-thirds, according to the London-based research firm Capital Economics. 

While air traffic, tourism and business arrivals are rebounding, the longer the standoff between Washington and Tehran lasts, the bigger the threat to Dubai's reputation as a global business hub.

Safe-haven status on hold

Some high-net-worth individuals who embraced Dubai as the playground for the rich and famous have questioned whether it truly is the safe haven it promised to be. Many have turned to two other leading financial centers — Singapore and Switzerland — to park at least part of their assets.

Wealth advisers in both countries recently reported a sharp rise in enquiries from Dubai-based clients, with Swiss private bankers expecting tens of billions of dollars in new inflows from the Gulf. 

But rather than being competitors, the two hubs tend to attract different types of wealth, says Ryan Lin, a Singapore-based lawyer and director at Bayfront Law. 

"Switzerland tends to appeal to European and global clients, while Singapore is more likely to benefit from Asian origin wealth," Lin told DW.

Singapore pioneered the model that Dubai later emulated, building a sophisticated ecosystem for family offices — private firms set up to manage investments, tax and estate planning. These solutions are especially attractive to families from countries such as China, India and Indonesia.

Switzerland, meanwhile, relies on a long tradition of private-banking and its reputation for neutrality. For those seeking to divest some of their assets from Dubai, the shift is often a "choice between growth and preservation," said Till Christian Budelmann, chief investment officer at Swiss private bank BERGOS.

"Singapore is excellent for capturing Asian growth, but Switzerland remains the world's premier anchor for capital preservation," Budelmann told DW, adding that the Alpine nation "offers a level of systemic distance from geopolitical hotspots that Singapore ... cannot always guarantee."

Real estate boom cools

Beyond the immediate slump, the conflict threatens Dubai's longer-term appeal to expatriates and businesses. The city's cosmopolitan lifestyle helped fuel a real-estate boom that saw prices of prime villas nearly double between the pandemic and the end of 2024.

Now many are worried about the sector. In March, the total value of residential property transactions fell nearly 20% month-on-month to about $10.1 billion (€8.64 billion), Bloomberg reported last month. 

Forecasts for Dubai's property sector by Citi Research and real estate consultancy Knight Frank now point to a potential 7-15% price correction.

Despite the Iranian strikes, most high-net-worth individuals are, however, not pulling out of Dubai; they are diversifying. 

Budelmann describes this as "strategic hybridity," where clients keep their operational businesses and some lifestyle assets in the UAE but shift long-term wealth and, in many cases, establish a secondary residence in Singapore or Switzerland.

Economic boom on hold

Around a fifth of Lin's Dubai-based clients plan to stay put and view the instability as temporary now that Iranian strikes on Gulf targets have eased and efforts continue to reopen the Strait of Hormuz.

For many others, a foothold elsewhere is now considered an essential insurance policy.

Before the war, Dubai's economy was booming. In 2025, the emirate recorded GDP growth of around 4.7% in the first nine months. 

A record 9,800 millionaires moved to Dubai last year, bringing with them an estimated $63 billion in new wealth, according to consultancy Henley and Partners.

The emirate offers zero personal income tax, no capital gains or inheritance tax, and a corporate tax of just 9% on profits above about $100,000. Companies in free‑trade zones pay no tax at all on qualifying income.

Popular for good reason

From a humble desert settlement, Dubai has spent the past 50 years pushing the boundaries of innovation and engineering.

Dubai watchers believe that if the ceasefire holds and confidence returns quickly, the city could rebound fast. They also caution against writing off the home to the world's tallest building — Burj Khalifa — and a long list of other seemingly impossible projects that have become global icons.

Before the war, Dubai's ruler, Sheikh Mohammed bin Rashid Al Maktoum, put in motion plans to turn Dubai airport into the world's largest aviation hub and double the size of the economy by 2033.

Other bold projects are also set to make up the city's future, such as plans for a 93-kilometer climate-controlled sky-walkway known as The Loop, the world's largest artificial reef system with over one billion corals and a striking Artificial Moon resort.

So, while many wealthy investors are hedging their bets, fully exiting Dubai would mean leaving behind an exciting, cosmopolitan life in the desert.  

Edited by: Tim Rooks