As we all know the UAE has been caught up in the conflict in the middle east which started on the 28th February. The vast majority of the drones that have been directed at the UAE have been intercepted or have fallen harmlessly into the sea. But the residents of the UAE are spooked, we aren’t used to the loud bangs and flashes in the sky, and inaccurate social media can promote further anxiety. People outside the country have also been affected by the sensationalism in the news and social media reels.

So, given all of this unease, what will become of the real estate market in Abu Dhabi once peace breaks out? Is it on the verge of collapse, or is this a temporary issue? Of course, we don’t have a crystal ball but let’s start with what we do know.

Abu Dhabi’s Economy is Operating from a Position of Strength

· The economy of Abu Dhabi hasn’t materially changed since the outbreak.

· The IMF predicted the Abu Dhabi economy would grow by 5.8% in 2026, that is well ahead of China and only slightly behind India.

· S&P affirmed Abu Dhabi’s AA/A-1+ rating on 6th March citing “Abu Dhabi’s substantial fiscal, economic, external, and policy flexibility will act as an effective buffer against the impacts of regional conflict”

· So far, the attacks haven’t seriously damaged any infrastructure.

· According to Reidin Abu Dhabi real estate prices increased by 32.9% in 2025.

When peace breaks out the Straight of Hormuz and the airspace will re-open as usual. Unlike Iraq, Kuwait, Bahrain and Qatar the UAE can use its Fujairah terminal to bypass the blockade until then.

Economic Risks

There are only two ways in which the current situation could negatively affect the overall Abu Dhabi economy.

· Tourism will be impacted. External unease will persist after the hostilities cease. However, we can expect the Abu Dhabi government to address this proactively given the many levers it has at its disposal (cash reserves, reduce taxation, cheaper flights etc).

· People may leave the UAE after this crisis, but they will be replaced. What if the companies leave? The economy looks good so the only reason they would choose to leave is if their staff as a group could not be persuaded to stay. Will those companies who leave then be replaced themselves, with more bullish entrants?

There may be an upside to all this upheaval. The price of oil. As of writing oil climbed over $100 a barrel before falling back, and we can expect higher prices to persist even once the Strait of Hormuz open (see below).

The Stock Market Remains Resilient

What are professional investors thinking about the Abu Dhabi Economy? When markets reopened on Wednesday, March 4th, ADX’s benchmark index, the FTSE ADX General Index, ended the day down about only 1.9 % compared with the prior official close before the halt. In the week following it fell only 5%. That is a very small dip considering what had been going on in the days before.

What about Oil?

Oil is up, and up a lot, because the Strait of Hormuz are closed. However, there are other factors that will mean the price will stay higher longer, benefiting Abu Dhabi over the next few years.

· Venezuela’s output has been curbed or removed along with their president Maduro.

· It is very unlikely that Iran will be exporting a single barrel of oil for the foreseeable future.

· Abu Dhabi can still use Fujairah and Saudia Arabia can use the Red Sea to export at least some oil, but others in the Gulf aren’t so lucky. Iraq in particular has already reached its oil storage capacity and has begun winding down production because it has no-where to put the oil. Shuttering production will mean when it is restarted it can take up to 12 months to reach full output.

With these countries offline that is a loss of millions of barrels of oil from the market that Abu Dhabi and the UAE will step in to fill (in the week following the outbreak of hostilities Saudi Armaco is up nearly 6% on the Tawadul). Will the oil bonanza offset the hit to tourism?

Real Estate Supply

In its 2025 H2 report ADREC (the Abu Dhabi real estate regulator) predicted that supply would be around 3.5% until the end of 2030. Demand through to the end of 2025 in occupied units was 6.6%. They were predicting a large undersupply in the Abu Dhabi Market for the next four years.

According to Reidin Abu Dhabi real Estate increased by 32.9% in 2025. Abu Dhabi real estate was at an all-time position of strength, both in current performance and predicted outcomes over the next four to five years.

What if we Get a Demand Shock?

What if people decide to leave Abu Dhabi? From the conversations most of us have had with our friends it doesn’t seem anecdotally that many people are planning to leave, but there will be some. If they do leave, they will vacate a job role that will hopefully be filled by a new entrant who is not as worried about the past instability. Only if the companies themselves decide to leave will this have a longer-term impact on demand.

What about Rentals?

Unless there is a mass exodus, rental rates will likely remain stable. Rented accommodation is a necessity (whereas purchased property is a discretionary item), people must rent a property, and they will continue to do so. Rents will flatline if no more people are added to the population and eventually increased supply will lower them. But we would expect with strong economic fundamentals that as soon as people feel that the peace is stable then the migration of people to the UAE will resume.

In the short-term people will stop coming into Abu Dhabi until they can be sure the peace is a lasting one.

How Will Sellers React?

Those who were looking to sell in February, either to lock in gains, or because they earmarked the income for another purpose, will stay in the market. They may be more realistic about the price they were looking for, understanding that genuine buyers will initially be scarce. Some owners may decide to sell because they have lost confidence in the UAE. But I feel these will be few and far between, particularly given the strong economic fundamentals.

Sharp price drops only occur when there is forced selling. That will only happen if:

· People start losing their jobs; or

· Interest rates spike

If someone is leaving the country they may want to exit at a lower cost but if rents are stable, they may get a property manager and rent it out.

To see big price drops from price increases of 32.8% in the last year is a huge boat to turn around. For context in the US in the 2008 crash, prices only fell about 1% per month for the first six months, according to the S&P/Case Shiller Index.

What do Buyers do in Times of Uncertainty?

When buying property in times of uncertainty people often adopt a “wait and see” approach. Initially we’ll see less buyer enquiries, and those who were ready to purchase may postpone, but not cancel, their acquisition. Buyers will start to come back when they see three things:

· their job is safe, which with the economy in a good place it should be;

· peace is holding and hostilities are unlikely to re-start in the near term; and

· directionality in the market, is it up, down or sideways?

The brave as always will buy early, get the deals and reap the rewards. The ones who will take longer to return will be the non-resident investors. In the same way as tourism will suffer in the near term these buyers outside the UAE will need more persuading of the stability of the market.

How Will the Off-Plan Market React?

Off plan was the one bright spot in the “oil recession” of 2015 to 2021. It was a way in which people who believed in Abu Dhabi but wanted to bet on the future instead of “the now” could invest in real estate. Off plan is a bet on the market in three to four years on handover, as opposed to where the market was at the time of purchase.

Saying that, non-resident sellers may wish to exit the market now. It is a high hurdle to invest outside your country of residence and for people who aren’t here and don’t know the UAE that hurdle might now not be met.

For buyers the secondary market might now offer some good opportunities, and we would also expect developer offerings to be very fairly priced. Developers know there will be fewer buyers in the short term, and the competition should be fierce. Emiratis in particular will take a bullish view. They have seen a lot and are vested in the country for the long term.

How Does This Compare to the other Shocks?

· 2008/9 – Global shock, the UAE market followed all other markets down.

· 2015 – Gulf specific shock (Oil went to USD28 a barrel). Market dropped around 50% into 2021. In response UAE cut jobs and diversified its income stream (VAT and Corporation Tax).

· Covid - Global shock, the UAE market followed all other markets down.

· Post Covid most global real estate markets recovered but the UAE boomed.

· Current Hostilities. Gulf specific shock as in 2015 but without the long-term hit to oil income.

In Summary

Based on current market fundamentals in Abu Dhabi, there is no structural reason for property prices to decline due to short-term geopolitical tensions. Real estate is a slow-moving asset class. Sharp price corrections only occur when there is forced selling due to either liquidity crisis, or prolonged economic contraction. As long as there is no employment shock then we can expect a short period of stagnation as buyer and sellers assess the situation and then the market will pick up again if we see renewed inflows of people.