Impact &
Insights

Dubai 2026--2030: Macroeconomic Resilience Under a US--Iran War Scenario

The assessment evaluates Dubai's macroeconomic resilience under a severe US--Iran conflict shock during 2026--2030. The stress path combines a first-half 2026 escalation, closure or blockade of the Strait of Hormuz, supply-side disruption, and financial volatility across the Gulf Cooperation Council. A Markov-switching Bayesian vector autoregression with exogenous variables and time-varying transition probabilities translates those inputs into conditional macroeconomic paths. The model separates geopolitical-loss channels, policy-mitigation channels, and structural-resilience channels, converting each input into a state-contingent stochastic process. Scenario simulations indicate that aviation and financial variables are highly sensitive to geopolitical risk premia, but liquidity support and administrative fee relief can stabilize near-term activity when they prevent temporary cash-flow shocks from becoming credit contractions. Logistics diversification through Gulf of Oman and eastern-port capacity improves medium-term resilience by lowering the elasticity of Dubai's non-oil activity, real-estate valuations, and investor sentiment to maritime chokepoints. Dubai's recovery path depends less on any single stimulus measure than on the interaction between policy backstops, restored mobility, and reduced exposure to external bottlenecks. The reported figures are conditional stress-test outputs, not deterministic forecasts of regional events or Dubai-specific macroeconomic outcomes.