Dubai was the promise that a future could be built from sand

For years, Dubai was the promise made real that one could build a future from sand. In just a few decades, it emerged as an international hub for trade, finance, tourism, and innovation – combined with a high quality of life, exceptional connectivity, and a sense of security that had become almost taken for granted by businesses, investors, and visitors.

On February 27, 2026, the prevailing question was less whether Dubai would continue to grow, but rather how fast. Then came the war. Seven months later, a more nuanced picture emerges: The successful model hasn't disappeared, but a factor that international players had long only partially factored in has become a real location factor – geopolitical risk.

Why Dubai was so attractive before the war

Dubai's appeal was never based on a single advantage. International entrepreneurs could operate with 100 percent foreign ownership in many sectors; specialized free zones offered industry-specific ecosystems. The tax environment remained internationally attractive, even though the old narrative of "Dubai = 0% tax" had long since become too simplistic with corporate tax, substance, and transfer pricing requirements. [1–3]

Added to this were a booming real estate market for years, golden visa and relocation effects, the city's high international visibility, and a lifestyle and creator economy that had turned Dubai itself into a global brand. As recently as January 2026, the "1 Billion Followers Summit" brought together more than 15,000 content creators and influencers, according to official figures. [4]

Then came February 28th – and the risk became visible.

The war didn't suddenly change corporate law or tax rates. It changed the perception of risk. Dubai had always been part of the Middle East, of course; however, for many investors, tourists, and businesses, the location felt largely decoupled, both economically and psychologically, from its conflicts. This assumption could no longer be maintained after the attacks on the Gulf region.

Between the initial shock and the current situation, there was a real prospect of de-escalation in June. A Memorandum of Understanding between the US and Iran opened a phase of negotiations; however, the détente proved unsustainable. In July, the escalation increased again. At the end of September, the Strait of Hormuz remained severely disrupted; diplomatic contacts were maintained, but a lasting agreement was still lacking. [5–7]

For trading and manufacturing companies in particular, the conflict is therefore not just reflected in the headlines. War risk insurance premiums for voyages through Hormuz temporarily rose from around 0.25 percent of the ship's pre-war value to several percent. This makes geopolitical risk a direct factor in costs, deliveries, and contracts. [6]

Economically impacted – but not systemically shaken

Dubai is more dependent than Abu Dhabi on the mobility of people, goods, and capital. Consequently, the conflict hit aviation, logistics, and tourism hard. Dubai International Airport counted 31.5 million passengers in the first half of the year – 31.3 percent fewer than in the same period last year. Cargo volume was 28.7 percent lower. At the same time, monthly passenger numbers rose from 5.0 million in June to 6.3 million in July. [8]

The same pattern is evident in tourism. Hotel occupancy fell to 36 percent in March and recovered to 66 percent by August. In August, 869,000 international overnight guests arrived; from January to August, the figure was 6.97 million. This represents a significant recovery – but not yet a return to pre-war levels. [9]

Real estate is no longer a one-way street. According to ValuStrat, citywide residential property prices were around 10 percent below the level at the beginning of the conflict by June. At the same time, transactions involving completed properties rose by 46.8 percent in June compared to May. The segments are developing very differently. In any case, a blanket statement "Dubai real estate goes up" is no longer a sufficient investment thesis. [10]

And then there is data that doesn't fit the crisis narrative.

The financial center continues to grow. At the end of the first half of the year, 10,018 active companies were registered in the DIFC – 30 percent more than a year earlier. The number of AI, FinTech and innovation companies was 1,933; family business-related entities were 1,408. [11]

The long-term technology strategy has also not been suspended. Multi-billion-dollar infrastructure and AI projects are continuing; MGX closed its first fund in July 2026 with $49 billion in capital commitments – in the midst of war. A similar situation exists regarding the government's credit rating: the UAE still possesses substantial fiscal buffers. This argues against a systemic crisis, even if individual sectors are under considerable strain.

Perhaps the greatest damage is psychological.

Physical damage and economic perception need not be proportional. In the first days of the war, according to official figures, the UAE processed claims for 30,913 stranded travelers; flights were canceled, people were stuck at airports or in hotels, and cruises were interrupted. [12] Such experiences shape risk perception more than defense ratios or credit ratings.

For German companies, the fact that the Federal Foreign Office continues to advise against non-essential travel to the UAE and describes the regional situation as volatile adds another layer of concern. [13] The objective data may therefore already be improving, while the subjective feeling of safety is still lagging behind.

Even subtle signals are therefore not entirely irrelevant. Some German-speaking reality TV and social media personalities are now orienting themselves towards places like Mallorca. This doesn't necessarily indicate a significant influencer exodus. However, it's noteworthy for the Dubai brand that alternative lifestyle destinations are once again increasingly being compared to other destinations.

What does this mean for companies today?

The right question isn't "Dubai – yes or no?". It's: What function should Dubai fulfill within my international structure? As a regional sales hub? Holding company location? Family office? Technology and innovation hub? Operating company? Logistics center or personal residence?

The answer depends on the business model. A software company with customers in India, Africa, and the Gulf States has a different risk profile than a trader whose supply chains depend largely on the Persian Gulf. The new risk landscape therefore does not automatically make the location less attractive; it increases the requirements for structure, governance, contracts, business continuity, and geographic diversification.

Conclusion: Dubai is a more challenging choice today.

The tax and corporate advantages of the location remain largely intact. The financial center is growing, the UAE continues to invest in infrastructure and artificial intelligence, and so far there is no sign of a general exodus of companies.

At the same time, Dubai has lost an advantage that rarely appeared in any balance sheet: the notion of being economically central to the Middle East without having to bear its geopolitical risks to a significant degree. Tourism and aviation have suffered considerably. Real estate must once again be assessed selectively. Security and connectivity can no longer be taken for granted when making location decisions.

Therefore, choosing Dubai today is not necessarily a less interesting decision than it would be in February 2026. However, it is a more challenging one. The crucial factor will be whether the location's continued significant economic, regulatory, and strategic advantages outweigh the now-visible geopolitical risk premium for the specific business model – and whether Dubai can regain something in the coming months that is harder to build than an airport or a skyscraper: trust.

Further training at OC Legal: UAE / international expansion · Contract law & commercial law · Market entry Germany & Europe

Update note: This article will be updated in the event of significant changes in the geopolitical or economic environment.

Sources and database (selection)

[1] UAE Government – ​​Full foreign ownership of commercial companies

[2] UAE Government – ​​Personal income tax / other taxes

[3] Federal Tax Authority – Corporate Tax Guide on Free Zone Persons

[4] Dubai Media Office – 1 Billion Followers Summit, January 10, 2026

[5] Reuters – interim US-Iran agreement / MoU, June 17, 2026

[6] The National – War-risk shipping premiums, Strait of Hormuz, July 17, 2026

[7] Reuters – Hormuz vessel traffic, September 22, 2026

[8] Dubai Media Office – DXB H1 2026 traffic, 08/26/2026

[9] Dubai Media Office / DET – Tourism recovery through August 2026

[10] ValuStrat – Dubai Residential CPI, June 2026

[11] DIFC – H1 2026 results

[12] ICP – Procedures for 30,913 stranded travelers, March 3, 2026

[13] Federal Foreign Office – Travel and Security Advice UAE