Tourists and visitors walk around the Sheikh Zayed Grand Mosque, the largest mosque in the United Arab Emirates, an important place of daily prayer in Abu Dhabi, United Arab Emirates. It has 82 domes of 7 different sizes and 4 minarets, with a large parking lot and shopping mall below.
Andrew Aitchison | In Photo | Getty Images
The US government’s consideration of the United Arab Emirates’ financial lifeline raises larger questions about what lies in store for the burgeoning post-war Middle East economy. The UAE has spent decades building one of the world’s most resilient tourism economies, built on global connectivity and continued infrastructure expansion. This model is currently under severe stress due to the war between the United States and Iran and the attacks Iran has launched against its own infrastructure.
Is this the “end of Dubai”? This is a question already being asked by some who have been closely watching the rise of Emirates. In the short term, it’s not just energy infrastructure risks that are having a negative impact on the economy, with damage already estimated at nearly $60 billion. Regional conflicts have had a significant impact on travel demand and consumer spending across the Gulf, with Dubai in particular absorbing much of the impact.
Early indicators suggest a rapid and synchronized setback, including fewer flights in the region, increased hotel availability, Airbnb cancellations and complications, and more cautious household spending patterns.
“The Middle East region is losing $600 million a day, and the UAE is taking the lion’s share of the hit,” said Nancy Gard McGee, professor of hospitality and tourism management at Virginia Tech.
Treasury Secretary Scott Bessent said Wednesday that currency swap agreements could be managed by the Treasury Department or the Federal Reserve, suggesting the UAE is not the only U.S. ally considering support.
Many experts are wary of betting on the UAE, despite legitimate questions about the lasting impact on consumers and tourist perceptions of the region.
At the center of the chaos is Dubai International Airport, the world’s busiest international hub, which has been “effectively shut down for several weeks,” McGee said.
More than 30,000 flights have been canceled across the region since the outbreak of the conflict, McGee said.
The UAE’s tourism model relies on constant movement of international arrivals, transit passengers, retail consumption and short-term stays that support the broader service economy. When that flow stagnates, the effects quickly cascade.
“Hotel occupancy in Dubai has plummeted by 70 to 80 percent,” McGhee said, citing security concerns and the presence of visible military infrastructure in major tourist destinations. “Many hotels are choosing to close for renovations to save on labor costs.”
Short-term rentals, which often provide a flexible buffer during economic downturns, are also in sharp decline. Approximately 250,000 reservations were canceled in March alone, an unusually simultaneous occurrence of reservation cancellations across platforms.
In addition to the collapse in inbound tourism, changes in domestic consumer spending are putting further pressure on the region’s consumer economy. Households across the UAE have shifted to a more defensive posture amid uncertainty, cutting back on discretionary purchases, postponing travel and increasing savings. This change in behavior amplifies the external shock of fewer tourists, reducing both international and domestic demand.
In an economy where retail, hospitality and services are deeply intertwined, the combination can accelerate the dynamics of an economic downturn. However, despite the severity of the disruption, the Gulf tourism market has rebounded rapidly after recent shocks, such as the financial crisis, pandemic, and regional tensions, often with the support of aggressive pricing, marketing campaigns, and infrastructure improvements.
“It’s important to recognize how the industry stepped up in the early days of the war to provide free accommodation to stranded people,” McGee said. “The government also strongly supports the tourism industry and is ready to bounce back once the situation stabilizes.”
Although the recent ceasefire has begun to restore limited traffic, traveler confidence remains fragile, but if the ceasefire continues, more durable confidence could be restored in the coming months.
At the moment, hotels are promoting staycations and discount packages to fill vacancies, with a focus on domestic and regional travelers. This change reflects a core feature of the UAE model: flexibility in sourcing demand, even if international travelers ultimately remain the key driver.
“Households are becoming more cautious about discretionary spending, and spending on retail and restaurants has decreased,” said Armin Moradi, founder and CEO of Casio, a spend management platform based in the region.
In the short term, the calendar and weather are not favorable for promoting tourism. The ceasefire means the economy could temporarily recover from late April to early June, but Moradi said the outlook would provide a “small cushion” for hospitality and retail sectors ahead of a summer slowdown as temperatures rise.
At the same time, the disruption is reshaping the calendar of the global event economy on which the UAE depends, though it may be slowing rather than eliminating revenue.
“Many industry events normally held in April and May will be postponed from September to November,” Moradi said, adding that this could lead to a year-end surge in demand. “Hotel bookings and travel costs should rise significantly to recover some from spring losses.”
Tourism is a rapidly growing sector. just ask disney
According to recent World Travel and Tourism Council estimates, tourism’s contribution to the UAE’s economy in 2025 will reach a record high of nearly $70 billion, accounting for nearly 12% of gross domestic product (GDP). This represents a 22% increase compared to 2019 levels and represents a significant share of the broader Middle East tourism economy, estimated at more than $200 billion. Dubai, the region’s tourism engine, also had a record year, welcoming more than 19 million international guests in 2025, according to Dubai Economy and Tourism Authority.
The UAE continues to position itself for long-term tourism growth, highlighting the tension between looming disruption and structural ambitions. One of the most notable developments is the planned one. disney Abu Dhabi’s theme parks are part of an ongoing and broader effort to deepen the country’s appeal as a global entertainment destination.
The project has been repeatedly mentioned by senior Disney executives as part of the company’s international expansion strategy since the conflict erupted, with some seeing it as a sign of confidence in the UAE’s long-term status as a tourism hub.
Disney Experience Chairman Josh D’Amaro highlighted Abu Dhabi’s progress at the company’s shareholder meeting in March, and Disney Experience Chairman Thomas Mazloum reiterated the importance of Abu Dhabi at the recent Frozen event held at Disneyland Paris.
A Disney spokesperson declined to comment.
The UAE’s model has long been built on global trends, welcoming millions of international visitors, serving as a transportation crossroads, and supporting a consumer-driven service sector. That same openness also creates vulnerability when faced with external shocks. Travel demand is highly sensitive to perceptions of safety, and even temporary disruptions can have a long-term impact on booking behavior.
“Travelers remain concerned about passing through the area and becoming stranded,” McGee said.
Moradi reiterated the common view of regional experts that the UAE’s long-term position remains intact. “I believe he will recover quickly,” he said. “Although seasonality plays a role in the hot summer, the tourism infrastructure is well established and will be able to accommodate the influx of tourists from August to December.”
“Development has not stopped,” Moradi said, adding: “Some vanity projects may be on hold and companies’ immediate cash flow needs have increased their focus on short-term profits.”
“The UAE is one of the most financially resilient economies in the world,” Ambassador to the United States Yousef Al-Otaiba said in a social media post on Wednesday. “Any suggestion that the UAE needs external financial support misrepresents the facts,” he added.
Once recovery begins, more difficult long-term challenges may come.
Part of the local economy is made up of expatriates and has been affected by the war. “Due to the uncertainty of home education and the prevalence of distance learning, many families have temporarily moved to their home countries, and some have no plans to return,” Moradi said. These external developments are exacerbating the slowdown not only in tourism but also in everyday consumption, gradually shrinking the economy, with the first real impact likely to be felt in August or September, he said.
“The biggest challenge we foresee is the recovery of human resources,” Moradi said. Short-term cost-cutting moves by companies, as well as at least temporary expatriates, could have long-term implications for the region’s workforce. “Companies are reacting quickly to layoffs, so it’s going to be quite difficult to attract talent once things return to normal,” he said.
