Dubai, Abu Dhabi residents return to a new normal: ‘Neither war, nor peace’

Every year, a summer lull in the United Arab Emirates gives way to a September rush. Offices fill up, school buses ferry children through city streets once again, hotels prepare for tourists chasing winter sun while professionals swarm to conferences across the country.

This year, the ritual will test the resilience of the UAE’s post-pandemic boom and whether low taxes and an attractive lifestyle can keep drawing people and capital amid a war that’s showing few signs of resolution. For now, its business as usual in parts of the economy.

Abu Dhabi’s wealth funds are still putting billions to work, encouraging Wall Street banks to add more Gulf staff, while the rush of hedge funds continues. Malls across Dubai and Abu Dhabi are packed with residents chasing “back to school” offers, and restaurants have remained busy.


Still, challenges remain as the regional conflict stretches into its seventh month. Continuing disruption in the Strait of Hormuz has raised import costs and fuel prices, while straining supply chains. Airport traffic, hotel occupancy and property sales have dropped, and recruiters say they are having to adjust packages to keep attracting the best talent.

Though the intensity of hostilities has abated since the peak of the war, when the Gulf country successfully fended off thousands of projectiles from Tehran, attacks on shipping and Gulf nations continue. The UAE said it intercepted a drone over its territorial waters as recently as Aug. 31, prompting a senior adviser to decry “the state of neither war nor peace” and call for a sustainable solution.

Yet hours after that attempted attack, roads around schools in Dubai and Abu Dhabi were jammed with cars as children streamed in for the first day back — an example of how the most significant shock in the country’s history has, so far, not fundamentally disrupted many routines underpinning its economy.

At Brookfield-backed GEMS Education, about 1,800 students relocated when the war began and roughly 700 have returned, Chief Executive Officer Dino Varkey said. He expects 147,000 enrollments this year, 2,000 more than 2025, but cautioned growth may be softer than historic levels.

Dubai-listed Taaleem Holdings PSC has seen enrollment across its private schools rise roughly 7% from the previous academic year to about 19,500. CEO Alan Williamson said its schools were “still seeing demand outstripping supply even in what we would all agree has been a very challenging period.”

Tellingly, seven new private schools opened in Dubai this year, adding 17,000 new places, including branches of international institutions where fees can run as high as about $42,000 a year. Britain’s Harrow and Rugby School have unveiled Dubai campuses this year, while Harrow has plans for an Abu Dhabi branch next year.

There are also signs of broader economic momentum. While the central bank expects GDP growth to slow to 1.7% this year, economists surveyed by Bloomberg now anticipate a rebound of about 7% in 2027.

The UAE’s financial hubs continue to grow, even as competition for global capital intensifies. Singapore and Hong Kong are offering incentives to hedge fund managers, while Greece has recently attracted some big names. Still, Dubai International Financial Centre crossed 10,000 active companies, while Abu Dhabi’s ADGM issued almost 2,000 licenses and added 4,700 workers in the first half of the year.

But the influx appears to be broader than finance. Dubai’s population hit 4.58 million at the end of 2025, and the city added around 200,000 residents this year, according to government figures.

That increase is showing up in traffic. Activity near DIFC recovered to about 90% of pre-war levels before slipping in August during the school break, according to mobility analytics firm xMap. The rebound was slightly more muted around Palm Jumeirah and Dubai Marina, likely because those areas are more dependent on tourism.

Abu Dhabi’s $2 trillion in sovereign wealth and deep pools of private capital in Dubai have underpinned the relative strength. Officials have rolled out incentives for sectors like tourism and housing, while an uptick in dealmaking from sovereign entities is prompting firms that work with them to add headcount. Many have started offering more generous allowances for housing, return flights and family travel.

“Employers would rather offer a one-off guarantee or relocation protection than bake a temporary geopolitical risk into permanent compensation,” said Greg Agius, Switzerland-based CEO of the eponymous recruitment firm specializing in finance and private banking.

Demand for artificial intelligence talent also remains strong, though international candidates are doing more due diligence before relocating to the region, said Dan Wardle, a recruiter at tech recruitment firm Discovered.

Elsewhere in the Middle East’s fourth-largest economy, growth in parts of the real estate sector is softening. Sales have slowed relative to the boom years that followed the pandemic and some rents have eased. Still, sellers have largely held off on price cuts. Governments have introduced programs to support residents, including flexible monthly rent payments in Dubai and a rent freeze in Abu Dhabi.

Inflation remains a concern, in line with most other economies contending with the global jump in energy costs and disrupted trade. The UAE’s gasoline prices have climbed about 60% since the war began, though they remain significantly below levels in the US and UK. Growth in the UAE’s consumer price index will accelerate to 3.2% in 2026 before easing to 2.3% in 2027, according to the median of 11 economist estimates compiled by Bloomberg.

Ahmed Galal Ismail, the CEO of Dubai-based Majid Al Futtaim, said the conglomerate is navigating a “challenging operating environment,” with hospitality dented by a pullback in tourism and non-food retail facing product availability issues. The group is passing on some higher costs to shoppers, while consumers are delaying big-ticket purchases, he told Bloomberg TV.

Those strains are most acute at Jebel Ali Free Zone and its port, which together account for at least a fifth of Dubai’s GDP. The UAE is now trying to rejig supply chains and develop new export routes, while outlining a multibillion-dollar infrastructure push as part of its “Zero Hormuz” strategy to bypass the waterway.

The conflict has also impacted traffic at Dubai International Airport, which fell by almost a third in the first six months of the year. The hub expects demand to recover later in 2026, but has pushed back its target of 100 million annual passengers.

Dubai hotel occupancy fell to about 64% in August from 76% a year earlier, while room rates dropped about 10%, according to Philip Wooller, Middle East and Africa director at CoStar. “That, considering the reduction in international business, is still a remarkable result,” he said.

That’s due in part to a range of incentives on offer, including campaigns offering free medical insurance and visa-free travel for international visitors. Many hotels and restaurants have also targeted residents with staycation deals and discounts to weather the slowdown.

On a late August weekend, the Atlantis hotel’s Aquaventure water park, built on an artificial palm-shaped island, was packed with people enjoying a reprieve from the desert heat. Upmarket restaurants in the city’s DIFC have remained bustling even during the traditionally slow August.

A stronger recovery may partly depend on the full return of international airlines. Most global carriers remain suspended, with Turkish and Indian airlines among the exceptions.

Hotel operators are already seeing signs of improvement. Philippe Zuber, CEO of Kerzner International, which operates the Atlantis hotels and One&Only Resorts, said regional demand is being bolstered by a gradual return of international travelers, pushing occupancy across its Dubai properties over 80% for the year-end festive period.

Occupancy will likely get a further boost from conferences rescheduled for the final months of the year after being postponed during the conflict. The period is also typically the UAE’s busiest for tourism, with several high-profile restaurants slated to open in Dubai and Abu Dhabi ahead of the expected pickup.

December will bring a slate of major events, including the Formula One Abu Dhabi Grand Prix and the opening of the Guggenheim museum. Abu Dhabi Finance Week has also lined up some of the biggest names in global finance for its annual gathering that month.

Beyond the year-end calendar, the UAE’s traditional advantages should continue to draw expatriates, according to Monica Mali, chief economist at Abu Dhabi Commercial Bank.

“The various indicators point to the UAE’s population as remaining,” she said. “A favorable business environment, including low taxes, world class infrastructure and access to labor will continue to stand out in the medium term.”