Damage done by war to Gulf economy is growing

The U.S. government’s weighing of a financial lifeline for the United Arab Emirates posts bigger questions about what is in store for the booming Mideast economy post-war. The UAE has spent decades engineering one of the world’s most resilient tourism economies, built on global connectivity and continuous infrastructure expansion. That model is now under acute stress due to the U.S.-Iran war and attacks Iran has launched targeting its infrastructure.

Is this the “End of Dubai?” is a question already being asked by some who have closely followed the Emirates’ rise. In the short term, it’s not just energy infrastructure risks, with damage estimated at close to $60 billion already, that is hurting the economy. Regional conflict has had enormous impacts on travel demand and consumer spending across the Gulf, with the UAE — particularly Dubai — absorbing an outsized share of the shock.

Early indicators suggest a rapid, synchronized pullback: fewer flights, rising hotel vacancies, Airbnb cancellations and complexities, and more cautious household spending patterns in the region.

“Daily losses in the Middle East region are at $600 million, with the UAE taking a big proportion of that hit,” said Nancy Gard McGehee, professor of hospitality and tourism management at Virginia Tech.

Treasury Secretary Scott Bessent said on Wednesday a currency swap arrangement — he indicated that UAE was not the only U.S. ally which was under consideration for support — could be managed by the Treasury or Federal Reserve.

Many experts are cautious in betting against the UAE even though there are legitimate questions about the lasting impact on consumers and the tourist perception of the region.

At the center of that disruption is Dubai International Airport — the world’s busiest international hub — which, McGehee said, was “virtually shut down for weeks.”

Since the onset of the conflict, more than 30,000 flights have been canceled across the region, according to McGehee. 

The UAE’s tourism model depends on constant motion: international arrivals, transit passengers, retail consumption, and short-term stays feeding a broader service economy. When that flow stalls, the effects cascade rapidly.

“Dubai hotel occupancy has plummeted by 70–80%,” McGehee said, citing both security concerns and the visible presence of military infrastructure in key tourist zones. “Many hotels are opting to close for renovation to save on employment costs.”

Short-term rentals, often a flexible buffer in downturns, are also seeing sharp declines. Roughly 250,000 bookings were canceled in March alone, an unusually synchronized collapse across…