Dubai in Transit: The megalopolis is trying to shake off nightmarish war months, but caution remains in the air

When fire blazed from the Fairmont Hotel on the Palm Jumeirah, the archipelago that is the symbol of Dubai's untrammelled real estate ambitions, sky-scraping luxury and ceaseless migrant toil on the night of February 28, something broke in the emirate. The calm of the West Asian oasis was shattered.

Now, eight months after Iranian missiles streaked its skies and their burning fragments rained on the airport and residential areas, sending residents scurrying indoors and rich expats flying out, Dubai is trying to shake off that nightmare.

The traffic on the Sheikh Zayed Road is bustling. Dubai, the playground of tourists, has started to welcome them back after a brutal few months. International visitors between January and August plunged to 6.9 million from 12.5 million for the same period last year, according to the Department of Economy and Tourism, Dubai. But August was a relief, with 888,000 tourists flying in from across the world.

This had an input on the hospitality occupancy, which fell to 36% in March, climbed to 66% in August. Hope sprang in the emirate. That has proved to be short-lived. Redseer Strategy Consultants' October shows stagnation in occupancy rate at 65%.

"It has been a roller-coaster ride for us," says Saurabh Tiwari, vice president-operations (Middle East, Sri Lanka & Maldives) of the Indian Hotels Company Limited, which runs three hotels in Dubai, including the Taj Exotica on the Palm Jumeirah and the Taj Business Bay. "When the crisis started, we had no idea what to do because we never thought something like this could happen in Dubai. But the authorities and the tourism industry did a great job in helping with the recovery." Tiwari expects occupancy to rise in December: "Q4 looks very decent for us. But it won't be like 2025," he says.

Dubai is caught between hope and caution. While the skies over the United Arab Emirates (UAE) are clear, the region is still roiled in conflict and uncertainty as Saudi Arabia and Houthi rebels from Yemen continue with airstrikes, and oil prices fluctuate with the changing direction of the US-Iran war.

"With reports of attacks in the region, many people do not necessarily distinguish between Saudi Arabia and UAE. They perceive the wider region as being disturbed," says a senior hospitality executive in Dubai.

This could push a full recovery in core sectors like real estate and hospitality to 2028, according to industry executives and experts. Businesses are putting expansion plans on hold and prioritising revenue protection over aggressive growth.

Akshay Jayaprakasan, associate partner, Redseer Strategy Consultants, says, "Q4 was an important season that was expected to drive recovery in the hospitality sector. Recent rise in geopolitical tensions has not helped. So, this year might be one of recalibration. 2027 will see normalisation. More positive returns will start coming in from 2028." He expects average occupancy to be 70% in 2027 and a full recovery to 2025 levels by 2028.

Some hotels are even prioritising occupancy over revenue. Says Tiwari: "We are trying to make sure the occupancy box is ticked, even if the average rate box is not. For Q4, we are forecasting a 10-15% drop in rates, but occupancy will be high."

On the ground

The real estate sector is still reeling from the March blow. At the Capital Club Dubai, a private business club in the Dubai International Finance Centre, property consultant Ritu Kant Ojha breaks down the change on a micro level. "I was handling 100 real estate queries a month until February," he says. These fell to under 20 in the months following the Iranian strike. "Things started looking up in September and enquiries have gone up to 35 a month. But deal closures are not happening."

The value of Dubai's residential sales fell -47% in Q3 2026 (July-Sep), year-on-year, to AED 72.6 billion, while transaction volumes declined 38% to about 37,000, according to the Dubai Land Department.

Aayush Puri, CEO, residential, Middle East, Anarock, says purchasing decisions have become more selective. "Buyers are increasingly assessing pricing, rental yields, developer credibility and exit potential before committing capital," he says.

Large businesses with deep pockets could pull through these uncertain times. Mohamed Alabhar, chairman of Dubai's largest real estate firm Emaar, said last month that the company could go five years without making a single new sale and still remain profitable, thanks to its significant backlog of homes that have been sold but not yet delivered.

Many others are not so optimistic. "We may have to scale down our stores in the next few months if tourist inflows do not go up," says the owner of a jewellery business in UAE, requesting anonymity.

Even as sales have fallen below last year's levels, rents remain elevated and shipping and insurance costs are going up due to the war. "We feel the government should bring back pandemic-era stimulus measures and economic support packages for businesses," he says.

Businesses are cautious about making long-term commitments. "Optimism is there, but results have yet to be seen. Since 2026 has already seen a decline, in some cases, companies first want to recover what they achieved in 2025," says Sahitya K Chaturvedi, secretary general, Indian Business and Professionals Council, Dubai.

Another sector that has been affected is food and beverages. Iron Pillar, an India-based venture capital firm that backs growth-stage tech startups, says some of its portfolio companies, particularly in the F&B sector, have put their expansion plans to UAE on hold. "They will probably revisit their plans in the next quarter, depending on how the holiday season unfolds and how the current conflict develops," says Anand Prasanna, managing partner, Iron Pillar. At least three of its portfolio companies have a presence in UAE - Cure Foods, FreshTuHome and Flipspaces. Prasanna says businesses want greater clarity on how the situation will evolve in the region.

Hire, lower

Recruitments are on pause mode. Amruta Heblikar, founder of Virtual Key, an HR firm in Dubai, says, "Businesses that expected the final quarter of 2026 to be stronger are now looking towards 2027 for a meaningful recovery in hiring."

Hiring picked up in September but has now moved to talent pooling mode, where candidates are identified for potential positions without translating into recruitment. "Companies are advertising vacancies and conducting interviews, but when it comes to issuing offer letters, several are not providing a joining or training date," says Heblikar.

Ankita Saxena (name changed), who runs an HR firm, moved her office from Business Bay, a central business district in Dubai, when war darkened the skies in March. She and her team have been working from home ever since. She hoped to shift operations to an office space by the end of 2026 but that plan is on hold. "We lost a lot of clients as companies cut down on hiring costs. We ourselves had to reduce our team. We will evaluate shifting to an office space next year," she says.

Most hospitality companies are not working at their full strength. "While most of our team is back, the return of the remaining staff has been deferred to November-end or December, following the new developments in the region," says a manager of a five-star hotel that opened months before the conflict started in February.

The escalating geopolitical tensions are telling on employees. Ashish Singh (name changed), a front-desk executive at a five-star hotel in Dubai Marina, returned to work from his home in Lucknow early September. Two months later, he is gripped with uncertainty due to the conflict in Saudi Arabia and renewed fears of war between Iran and US. "I hope I am here for good now and things don't pause again," says the 28-year-old.

The hiring slowdown has put pressure on salary expectations. "Some of our candidates were earning around AED 20,000. They are now willing to work for AED 15,000," says Heblikar.

However, falling salaries and rising talent pool are also drawing some companies to Dubai. Rajat Mohan, managing partner of tax consulting firm AMRG Global, decided on a UAE expansion for his Delhi-based company in January. Undeterred by the regional friction, he finally moved his family and operations to Dubai in July. "I saw the market shift as an organic opportunity to scale," he says from his office in the International Free Zone Authority. "Many businesses have become highly cost-conscious and are actively renegotiating deals. This allows us to get in with competitive pricing. Besides, following the corporate layoffs earlier this year, a rich talent pool is available, enabling me to secure top-tier local staff at a low market cost."

Car indicator

The slowdown in some sectors reveals the stress in the economy: UAE's GDP grew by 0.4% in the first half of 2026, compared with 4.2% in the same period in 2025. According to the automotive market tracker Focus2Move, the UAE vehicle market recorded a 22.2% decline, year-on-year, in new car sales in the first seven months of 2026.

Meanwhile, the second-hand car market is growing. Says Abhinav Gupta, CEO of Cars24 Arabia, an e-commerce platform for used cars: "We had a 30-35% growth in sales in September. People are a little more conservative with their spending. Some consumers would downgrade rather than spend on a new car. At the same time, supplies are tightening, making it hard for us to source vehicles. In the short term, we are being cautious because further volatility cannot be ruled out."

However, nothing will stop UAE from lighting up in December. The month will open with the Abu Dhabi Grand Prix, which the Formula 1 chief has said will go ahead despite the regional conflict. Mariah Carey will perform her "Christmas Time" concert at the Etihad Arena, followed by Katy Perry's New Year's Eve performance at the Atlantis, The Palm. When she sings, "I got the eye of the tiger, a fighter/Dancing through the fire/ Because I am a champion, and you're gonna hear me roar", Dubai will sing along, hoping 2027 will be a whole new year.