Iran’s retaliatory strikes across the Gulf have triggered the most widespread business disruption in the region since the COVID-19 pandemic, forcing airport closures, halting port operations and sending shockwaves through financial markets.

The attacks, launched in response to a joint United States-Israeli assault on Iran, landed across every major state in the Gulf, a region that has spent decades building its reputation as one of the world’s most reliable business hubs.

Three people were killed by the attacks in the United Arab Emirates (UAE), and loud explosions were heard for a third day in Dubai and Abu Dhabi on Monday.

The strikes marked an unprecedented escalation for Dubai, whose modern identity was built on being insulated from the region’s conflicts.

From humble beginnings as a small fishing village, the emirate of Dubai used modest oil revenue to build ports, airports and trade centres before pivoting in the 1990s to luxury tourism, real estate and financial services.

“Regionally, the impact across (Gulf) economies is mixed,” said Vijay Valecha, Chief Investment Officer at Century Financial. “Elevated oil prices provide a fiscal cushion for producers such as Saudi Arabia and Qatar, strengthening revenues and liquidity. However, trade, logistics and tourism, particularly in the UAE, would face pressure if shipping risks rise or regional sentiment weakens.”

Stock markets fall

Gulf stock markets fell sharply when trading opened on Sunday, with Saudi Arabia’s benchmark index dropping more than 4% at the open and closing down 2.2%. Oman closed down 1.4% and Egypt lost 2.5%, both paring earlier losses. Qatar’s index was down 2% in early trading on Monday.

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The fresh crisis has rattled global markets. Brent crude rocketed to just over $78 a barrel on Monday, up from a Friday close of $72.87. Asian equities fell broadly, with Japan’s Nikkei down 1.6%, Hong Kong’s Hang Seng losing 1.8% and Taiwan’s benchmark shedding 0.9%.

UAE, whose financial markets don’t trade on Sundays, took the rare step of closing the exchange on Monday and Tuesday. Kuwait was closed on Sunday and suspended trading until further notice.

“Markets will continue to be fragile and volatile as long as the military actions are active,” Mohammed Ali Yasin, Chief Executive of Ghaf Benefits, a Lunate company in Abu Dhabi, said before news of the market closing. “Usually in such events, the international institutional investors are the ones that put the selling pressures initially…while local ones try and soften the drops by picking the leading stocks.”

Iran’s strikes targeted airports, military installations, ports and hotels across the Gulf, with both Dubai International Airport and Abu Dhabi’s Zayed International Airport sustaining damage. One civilian was killed while 11 have been injured across the two sites.

A berth at Dubai’s Jebel Ali Port also caught fire following an aerial interception.

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Some of the UAE’s biggest companies include Dubai developer Emaar Properties and retailer Majid Al Futtaim. The country has also become a magnet for global hedge funds and major banks seeking proximity to vast pools of sovereign wealth managed by ADIA and Mubadala.

Ramadan networking

The disruption comes at a particularly sensitive moment in the Gulf’s business calendar. The attacks fell during the Islamic holy month of Ramadan, when corporate iftars and suhoors – the communal meals that break and begin the daily fast – are among the region’s most important networking events.

Emails seen by Reuters show that gatherings hosted by Dubai carrier Emirates, Abu Dhabi energy company Masdar, Mubadala and education firm GEMS, along with the Department of Government Enablement, have been cancelled or postponed.

For a region where relationships underpin business dealings, the loss of Ramadan’s networking season adds a less visible but significant cost to the disruption already unfolding.

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Strikes also hit residential areas around Dubai Marina and Palm Jumeirah, setting the Fairmont The Palm hotel ablaze and damaging the Burj Al Arab.

The Fairmont had recently been sold for $325 million to Kuwait’s Arzan Investment Management – a deal seen as a marker of surging Gulf hospitality demand – making the damage one of the starker symbols of the toll on the region’s booming tourism economy.

The United States, United Kingdom and European Union have issued updated travel advisories for the Gulf following the strikes, urging citizens to avoid non-essential travel. Key transit airports, including Dubai, Abu Dhabi and Doha in Qatar, were shut or severely restricted on Sunday as much of the region’s airspace remained closed.