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5 min read
Foreign investment in the UAE amid geopolitical tensions: how is it holding up?
Over the past decade, the UAE has steadily built one of the most attractive investment environments in the world. Foreign Direct Investment (FDI), or long-term capital invested into businesses and assets, reached $45.6 billion in 2024, growing at a compounded annual rate of 20.4% since 2015. The country ranked 10th globally for FDI inflows that year. This trajectory has been shaped by sustained regulatory reform, infrastructure investment, and a consistent focus on market openness.
Recent geopolitical developments, however, have introduced a new layer of uncertainty. On February 28, 2026, the United States and Israel launched military operations against Iran, triggering a period of heightened regional tension. In the five weeks that followed, Dubai and Abu Dhabi’s stock markets lost approximately $120 billion in combined market value, flights were disrupted, tourism revenues came under pressure, and investors began reassessing near-term risk exposure.
The question that naturally follows is whether this changes the investment picture for the UAE.
Based on the signals from institutional investors and policy responses, the structural foundation remains intact. The market decline reflects uncertainty, while the underlying economic fundamentals remain anchored. Here is what the evidence shows.
$120bn
Market cap lost across Dubai and Abu Dhabi exchanges since Feb. 28
D1bn
Government stimulus deployed; DFM closed up 2.03% on the day
$20tn+
Assets managed by firms actively expanding UAE operations mid-conflict
$45.6bn
FDI inflow into UAE in 2024 — growing at 20.4% CAGR since 2015
UAE Exchanges Retreat as Geopolitical Tensions Rise
Dubai's DFM General Index has fallen around 16% since hostilities began, while Abu Dhabi's ADX is down roughly 9 percent. Together, that is approximately $120 billion in market capitalisation erased in five weeks. On paper, those numbers are significant.
Market movements during periods of conflict tend to reflect how investors feel about the near term, the duration of disruption, the scale of economic spillover, rather than a settled view on long-term conditions. Exchanges in the region, where trading volumes are thinner than in deeper global markets, tend to move more sharply in response to regional events.
Stock market movements during a crisis reflect how investors feel about the near term. By contrast, the UAE’s investment environment, regulatory stability, institutional depth, capital mobility, and financial infrastructure have not shifted in a meaningful way. Current evidence suggests continuity rather than disruption. Dubai, for example, rose to 7th place globally in the latest Global Financial Centres Index, its highest-ever ranking to date.
Two independent academics, from the American University of Dubai and NYU's School of Professional Studies, both describe the current drawdown as a temporary setback to sentiment, not a sign of deeper structural problems. The NYU professor, who previously worked with the US Department of State in the Middle East, noted that a genuine structural shift would involve regulatory restrictions or capital controls, neither of which has occurred.
Dubai Unveils D1 billion Support Package Following Central Bank's March Move
As the conflict entered its fifth week and regional signals remained mixed, Dubai’s Crown Prince approved a Dhs1 billion package aimed at easing financial pressure across key sectors. The move followed a separate liquidity-support measure introduced by the UAE Central Bank in March, pointing to a coordinated and sequential policy response rather than an isolated intervention.
The structure of the Dubai package is particularly notable. Rather than relying on direct fiscal spending, the measures focus on easing operational pressures: hotel and hospitality fees are deferred for three months, customs payment grace periods are extended from 30 to 90 days, and residency permit processing has been streamlined. The approach prioritizes liquidity and continuity, targeting sectors most exposed to immediate disruption, namely travel, tourism, and hospitality, while limiting additional fiscal burden.
This is not traditional government spending — it is designed to ease cash flow pressure through cost relief and payment flexibility, which makes it faster and more effective in the current environment.Bhavik Mehta — Deputy Head of Research, Century Financial
Market reaction suggested that the measures were viewed as credible. The Dubai Financial Market closed up 2.03% on the day the package took effect, reflecting a degree of confidence in the policy response. Around the same period, the Crown Prince convened approximately 300 business executives to discuss resilience strategies, reinforcing the sense that communication between government and the private sector remains active and continuous during the crisis.
Moments of stress often reveal more about institutional capacity than periods of stability. The emphasis on removing operational frictions and deferring costs rather than deploying large-scale direct spending, points to a policy approach focused on maintaining business continuity and preserving flexibility while uncertainty persists. It reflects an understanding that, in the early stages of a geopolitical shock, time and liquidity can be as important as capital.
Businesses on the ground remain cautious. A retail executive operating in the emirate noted that the real measure of the package's impact will only become visible once the conflict resolves and it is possible to assess sector-by-sector damage. The package addresses liquidity; it does not resolve the underlying uncertainty.
Global Asset Managers Forge Ahead Despite Uncertainty
Beyond what market indexes show, the behaviour of large institutional investors is a useful signal. These organisations have dedicated risk teams, deep regional knowledge, and long investment horizons. They are not making decisions based on five weeks of headlines.
Firms collectively managing over $20 trillion in assets have publicly reaffirmed their commitment to the UAE, and in some cases, have taken steps to grow their presence during the conflict period.
BlackRock $14tn AUM | Building product capabilities and hiring at ADGM; the Middle East is described as a "core strategic priority" |
State Street $5.7tn AUM | Actively recruiting in UAE and Saudi Arabia offices; conviction described as unchanged |
Lombard Odier $75bn+ AUM | Continuing to deepen Gulf capabilities for family offices and institutional clients |
Julius Baer $650bn+ AUM | Full operational commitment maintained across three UAE and Gulf offices |
Hillhouse Investment $100bn AUM | Opened a new ADGM office during the conflict period — the most recent major entrant to the hub |
These institutions are not betting on a quick end to the conflict. They are making commitments that are independent of it. Their reasoning is fairly straightforward: a base in the UAE provides access to some of the world's largest sovereign wealth funds, namely ADIA, Mubadala, ADQ's L'IMAD, as well as a growing ecosystem of family offices. That opportunity has not diminished because of five weeks of conflict.
Our commitment to investing in the region and supporting our clients is long-term and is unchanged.BlackRock spokesman, April 2026
Deal activity during the same period points in a similar direction. Abu Dhabi's 2PointZero completed a $2.25 billion acquisition of US gas infrastructure company Traverse Midstream Partners on March 31. IHC, Abu Dhabi's largest listed conglomerate, received final approvals for a $1 billion, 41.5% stake in India's Sammaan Capital. Saudi Arabia's PIF and Qatar's sovereign fund each closed transactions in the weeks since the war began. Transactions of this scale typically involve months of legal, regulatory, and board-level preparation, suggesting commitments that predate recent developments and have continued through them.
The entities deploying this capital are the ones closest to the region. They are moving outward, not pulling inward.
A decade of FDI growth does not reverse in five weeks.
The current turbulence is happening against a backdrop of sustained, compounding growth in foreign investment into the UAE. The numbers below are from the UAE Foreign Direct Investment Report 2025 and capture the trajectory that preceded the conflict.
Source: UAE Foreign Direct Investment Report 2025
Behind these numbers sits a sustained policy effort spanning free zone development, regulatory reform, and visa liberalisation, the cumulative effect of which had positioned Dubai and Abu Dhabi as increasingly significant destinations for global capital over the decade. DIFC and ADGM, the two hubs most directly associated with that trajectory, both closed 2025 with strong full-year figures — captured below as context for the environment that existed before February 2026.
The trajectory these numbers represent, built over a decade, is what institutional investors are buying into when they maintain or expand their presence now. A conflict that has run for five weeks, however disruptive, does not erase that foundation. What it does is create uncertainty in the short term, and with that, some degree of caution from businesses assessing their immediate position.
The reasonable conclusion, looking at the full picture, is that the UAE remains a credible and attractive destination for long-term investment. The near-term turbulence is real, it is affecting tourism, hospitality, and market confidence. But the institutions, the infrastructure, and the policy environment that drove a decade of growth are all still standing.