DO READ MY COMMENTS BELOW.
The Iran War Is the “Nail in the Coffin” for Dubai
by Jacob Shapiro - The World Isn't Ending.
The US-Israeli campaign against Iran is remaking the Middle East. And a casualty is Dubai’s positioning as the Switzerland of the Gulf—a stable intermediary that allows capital, goods, and information to move when politics gets in the way.
In stable, unipolar moments, those kinds of intermediaries fade into the background; in fragmented, multipolar ones, they become indispensable.
Dubai looked like the model modern intermediary, a flexible, non-aligned hub optimized for a world of competing powers. So, what went wrong (apart from the obvious)? And what will replace it?
THE SITUATION
To understand what’s happening, a little history helps. For as long as there has been globalization, there has been a need for financial intermediaries.
It wasn’t always so.
Globalization’s first emergence was a product of creative destruction. Genghis Khan’s 13th century invasions of Eurasia disrupted power balances, leaving behind fragmented global power centers linked by ironically stable trade routes.
Source: World History EncyclopediaThat fragmentation enabled the rise of the OG global financial intermediaries: the Italian commercial republics: Florence, Venice, and Genoa. Their opulent and obviously decaying wealth today is an echo of their past importance. These were trailblazers in combining cross-border finance, banking, and legal norms that allow strangers to transact at scale. (Thanks to Genghis Khan ripping up the trade routes).
Their biggest advantage was… geography. They sat at the intersection of trade between the Christian and Muslim worlds, financing commerce (and even war) across sovereign boundaries.
Geography giveth and geography taketh away. The rise of a strong Ottoman polity, the decline of the Mongols, and the European Age of Discovery saw globalization go truly global as Europeans bypassed overland trade routes. Amsterdam rose and fell as a global financial intermediary; then rose the British Empire and its imperial nodes (Bombay, Alexandria, Singapore, Hong Kong).
As the sun set on the British Empire, the world turned “multipolar” once more. That fractious environment led to World Wars I and II, wars that seemed unthinkable to the wealthy and powerful during La Belle Epoque, when globalization seemed inevitable and fundamentally good. It also led to the rise of Switzerland as a different kind of global financial intermediary, a safe haven for capital when the global stage was too volatile.
Switzerland and Singapore today are the gold-standard safe-haven cloisters: legally reliable, politically neutral, geographically removed from conflict, and trusted by global capital.
The Gulf’s Unlikely Switzerland
In the again-multipolar world—with its sanctions, tariffs, regulatory divergence—there is demand for optionality. Capital asks: Where can I go that isn’t fully subject to Washington, Beijing, or Brussels? In recent years, a popular answer was “Dubai.”
In under half a century, the United Arab Emirates reinvented itself from a British-protected petro-kingdom into a modern economy with real diversification and outsized regional influence. GDP more than quadrupled in 20 years; GDP per capita nearly doubled. In 2025 alone, the UAE saw a net inflow of 9,800 millionaires with a collective investable wealth of ~$63 billion.
Source: New World Wealth
Here’s the rub: It’s over.
Yes, that’s melodramatic. The UAE will likely still function as a tax avoidance haven for Russian oligarchs or wealthy Indian industrialists. But its success over the last 20 years is a casualty of the US-Israeli campaign against Iran. The UAE will be like the cantina in the space port of Mos Eisley in A New Hope.
Moreover, the war is simply the nail in the coffin. For the last ~10 years, the UAE has been busy disqualifying its own success:
It was never going to achieve geographic distance from zones of conflict.
It has not disconnected itself from the US—the AED is pegged to the dollar.
It is leveraging its sovereign wealth to fund massive, high-risk projects tied to AI and technology in the US, to the profligate tune of almost $2 trillion.
Add to that, the UAE government is active in conflicts in Yemen, Ethiopia, and Sudan, pursuing imperial ambition rather than protecting and extending what made it attractive to capital (a Venetian error).
In fact, the UAE has botched strategic neutrality so badly that it has been the target of more Iranian missiles and rockets than Israel.
There is useful historical precedent. Lebanon was once on the path to becoming the Switzerland of the region. From an October 23, 1964 edition of Time Magazine:
"Lying fat and silky beneath the Mediterranean sun, Beirut is an oasis of prosperity in the Arab Middle East. Tiny Lebanon’s flamboyant capital sprouts new buildings like palm trees, boasts more Mercedes than mullahs, lures thousands of tourists and happily shares its year-round sunshine with courtesans in bikinis as well as desert Arabs in burnooses. But Beirut’s most beneficent climate is the climate of trade, the heritage of its Phoenician forebears. In the Levantine landscape nothing seems to grow faster or greener than the city’s banks. Beirut is the world’s newest and fastest-rising financial center. In the last decade it has expanded its banking business by 1,000%—and it shows no signs of slowing".
Spoiler alert: Lebanon was done within a decade, consumed by civil war and eventually an Israeli invasion. It never truly recovered and is in decline now. And Lebanon is a beautiful country. It is not a petro-kingdom in the middle of the desert.
Perhaps the negativity is unwarranted. Perhaps the US will crush Iran, or perhaps regime change will throw down the Ayatollahs. But the geopolitics is clear. It is not on the UAE’s—or any Gulf country’s—side.
Where to Next?
Still… the world isn’t ending. The UAE success story will be replicated elsewhere. After all, the UAE had the right idea—open to multiple blocs, politically flexible, optimized for moving and parking capital—but it fumbled the policy; and due to its inherent geographic disadvantages, it did not have room for error. Switzerland and Singapore are obvious winners of the fallout. But for some other countries, an opportunity has emerged.
In order of speculativeness, a few contenders:
Uruguay already plays a similar role at a regional level.
El Salvador lacks a long track record of stability, but the Bukele government has dramatically improved security. Its bet on Bitcoin is an attempt to create distance from the dollar system, and its geography offers an interesting mix of advantages.
Guyana discovered a “fairy tale” discovery of oil in the 2010s that is coming online.
Scotland would need London’s permission (unlikely)… but has some of these attributes.
These sound out there… but so would the notion of the UAE 50 years ago, and so would the notion of Singapore 200 years ago, and so would the notion of Venice in 1200.
The key is to focus on where political flexibility, legal infrastructure, openness to capital flows, and geographic positioning combine. The Mongols destroyed the world but created the opportunity for Venice. The Iranian mullas have destroyed what remained of the Persian Gulf’s tenuous balance of power since Gulf War 2.0, and with it the UAE’s promise.
MY COMMENTS:
1. The 'liberalisation' of Saudi Arabia will also have a significant impact on Dubai and the UAE. Without a doubt many wealthy Saudis travel to Dubai, Abu Dhabi etc for entertainment and other distractions that were not available in Saudi Arabia until recently. But Saudi Arabia is now 'opening up'. So weekend junkie trips to the Gulf may not be necessary. Plus Saudi Arabia is the mother lode - the oil money is still there. If Saudi Arabia opens up some more, the capital flows will go towards Saudi Arabia, eclipsing the rest of the Gulf.
Dubai and the UAE were also a bridge between ayatollah Iran and the sane world. Translation: Plenty illegal ayatollah money was deposited in Dubai.
(Some analysts estimate that Iranian-linked assets and business holdings in the UAE could total around US$50 billion (RM200 billion). These are estimates, not official figures).
But if there is a regime change in Iran (ayatollahs disappear) and Iran becomes normal again, much of these money will go back to Iran. The UAE and Dubai will lose the Iran business.)
2. This situation presents a great opportunity for Malaysia. But unfortunately our fellows are bodoh macam nak mampus, so the opportunities will go to waste.
Malaysia enjoys a fake (in content) but perceived as real reputation as a functioning financial system. Fake because we are not a world class financial center. And we will never be.
The bodoh macam nak mampus fellows are more tuned into kampong issues than building up a real world class financial hub. You need world class corporate lawyers. Loan and bond documentation experts. You need world class bankers - not the bagi cukup kuota GLC lembus. And above all you need English. Sorry la brader. He/him is male, she/her is female ok.
We will need world class accountants and that really exclusive club of bankers - the syndicate lenders and deal makers - in multi currencies. Meaning someone who can pick up the phone and call five other banks in Hong Kong and Singapore and close a syndicated loan. Again all this runs on English.
What happens if you can do this? You get a Singapore. You get a Hong Kong. You can even be a New York or London.
But when banks are run by a look like me, talk like me, smell like me, eat with your mouth open like me cartel of village jockeys - you get what you get. A constipated financial system. Populated by bagi cukup kuota GLC lembus.
The Arabs destroyed the 1,000 year old Silk Road. Thereby forcing poverty upon themselves until today.
In 1453 they captured Constantinipole and cut off the Asian land route to the West - but made it accessible by paying taxes and tolls.
So the Portugese sailed around the Cape of Good Hope (1487)
And reached India by sea.
In 1492 Columbus discovered the Americas.
In 1492 Ferdinand and Isabella kicked out the last Arabs from Cordoba (Spain).
1492 was a grand vintage.
The West went out and colonised the world.
- Now it is the turn of the Chinese.
- They do not wish to colonise the world.
- The Chinese do not want you to become like them.
- The just need Arabs and Muslims to buy their prayer mats (sejadah).
- They need Africans to buy super colourful African style garments.
- They need Europeans to buy Italian fashion made by Chinese.
- They need Americans to buy made in China I-phones.
We must understand geography, history, (and now) technology. And how they present opportunities.
