‘Neither war nor peace:’ UAE residents return to new normal | Today’s news

(Bloomberg) — The United Arab Emirates’ annual summer lull gives way to the September rush. Offices are filling up, school buses are once again ferrying children through city streets, hotels are preparing for tourists chasing the winter sun, while professionals are flocking 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 continue to attract people and capital amid a war that shows no sign of resolution. For now, it is business as usual in some parts of the economy.

Abu Dhabi’s investment funds are still putting billions to work, encouraging Wall Street banks to add more Gulf staff as the hedge fund rush continues. Malls in Dubai and Abu Dhabi are packed with residents looking for “back to school” deals, and restaurants have remained busy.

But problems persist as the regional conflict drags into its seventh month. The ongoing disruption in the Strait of Hormuz has increased import costs and fuel prices, while disrupting supply chains. Airport traffic, hotel occupancy and property sales have fallen, and recruiters say they have to adjust packages to still attract the best talent.

Although the intensity of hostilities has eased since the height of the war, when the Persian Gulf country successfully repelled thousands of missiles from Tehran, attacks on shipping and Gulf countries continue. The United Arab Emirates said it intercepted the drone over its territorial waters as recently as August 31, prompting a senior adviser to denounce “a 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 clogged with cars as children streamed in for their first day back – an example of how the most significant shock in the country’s history has yet to fundamentally disrupt many of the routines that underpin its economy.

At Brookfield-backed GEMS Education, about 1,800 students were displaced when the war began, and roughly 700 have returned, CEO Dino Varkey said. It expects 147,000 registrations this year, 2,000 more than in 2025, but warned growth may be more modest than historical levels.

Dubai-listed Taaleem Holdings PSC saw private school enrollments rise by around 7% on the previous academic year to around 19,500. Chief executive Alan Williamson said their schools “continue to see demand outstrip supply, even in what we would all agree has been a very challenging period”.

Seven new private schools have opened in Dubai this year, adding 17,000 new places, including branches of international institutions where fees can be as high as $42,000 a year. UK schools Harrow and Rugby School unveiled Dubai campuses this year, while Harrow is planning a branch in Abu Dhabi next year.

There are also signs of broader economic dynamism. While the central bank expects GDP growth to slow to 1.7% this year, economists polled by Bloomberg now expect a recovery of around 7% in 2027.

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

But the tide seems to be broader than finance. Dubai’s population will reach 4.58 million at the end of 2025, and the city has added around 200,000 residents this year, according to government figures.

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This increase is reflected in traffic. According to mobility analytics firm xMap, activity near DIFC recovered to around 90% of pre-war levels before falling in August during the school holidays. The rebound was slightly more subdued around Palm Jumeirah and Dubai Marina, probably because these areas are more dependent on tourism.

Abu Dhabi’s $2 trillion sovereign wealth and deep private equity reserves in Dubai have fueled the relative strength. Officials have introduced incentives for sectors such as tourism and housing, while a surge in deal-making by sovereign entities is forcing 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-time guarantee or relocation protection than bake temporary geopolitical risk into permanent compensation,” said Greg Agius, Swiss CEO of the eponymous finance and private banking recruitment firm.

Demand for AI talent also remains strong, even as international candidates do more due diligence before relocating to the region, said Dan Wardle, a recruiter at recruiting firm Discovered.

Elsewhere in the Middle East’s fourth-largest economy, growth is moderating in some parts of the real estate sector. Sales have slowed compared to the boom years that followed the pandemic, and some rents have declined. Still, retailers 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, as most other economies grapple with a global spike in energy costs and disrupted trade. Gasoline prices in the UAE have increased by about 60% since the start of the war, although they remain well below US and UK levels. The UAE’s consumer price index growth will accelerate to 3.2% in 2026 before slowing to 2.3% in 2027, according to the median of 11 economists’ estimates compiled by Bloomberg.

Ahmed Galal Ismail, chief executive of Dubai-based Majid Al Futtaim, said the conglomerate was in a “challenging operating environment”, with hospitality disrupted by a decline in tourism and non-food retail facing product availability issues. The group is passing on some of the higher costs to shoppers as consumers put off big-ticket purchases, Bloomberg TV said.

These strains are most acute in the Jebel Ali Free Zone and its port, which together account for at least a fifth of Dubai’s GDP. The UAE is now seeking to adjust 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 also affected 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 passengers a year.

According to Philip Wooller, CoStar’s Middle East and Africa director, Dubai hotel occupancy fell to around 64% in August from 76% a year earlier, while room rates fell by around 10%. “This is still a remarkable result given the reduction in international trade,” he said.

This is partly due to the range of incentives offered, including campaigns offering free health insurance and visa-free travel for international visitors. Many hotels and restaurants have also targeted residents with stay deals and discounts to stem the slowdown.

On a weekend in late August, Atlantis Hotel’s Aquaventure water park, built on an artificial island in the shape of a palm tree, was packed with people enjoying the relief from the desert heat. DIFC’s upmarket restaurants have remained busy during what is traditionally a slow month of August.

A stronger recovery may depend in part on the full return of international airlines. Most of the world’s carriers remain suspended, with the exception of Turkish and Indian airlines.

Hotel operators are already seeing signs of improvement. Philippe Zuber, chief executive of Kerzner International, which operates Atlantis Hotels and One&Only Resorts, said regional demand was being supported by the gradual return of international travelers, which saw Dubai property occupancy increase by more than 80% at the end of the year.

Occupancy is likely to be further boosted by conferences rescheduled for the final months of the year after being postponed during the conflict. The period is also typically the busiest for tourism in the UAE, with several high-profile restaurants opening in Dubai and Abu Dhabi ahead of the expected pick-up.

December will bring a number of major events, including the Formula 1 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 the annual gathering this month.

According to Monica Mali, Chief Economist of Abu Dhabi Commercial Bank, the UAE’s traditional advantages should continue to attract expatriates after the end of the calendar year.

“Various indicators show that the UAE population remains,” she said. “A favorable business environment, including low taxes, world-class infrastructure and access to labor, will continue to stand out over the medium term.”

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