TEHRAN- Imagine spending years saving money and time to build a tall tower by the sea; the tower becomes so famous that every investor in the world wants to buy a unit in it. But suddenly, a war breaks out in the neighborhood, and investors flee; your stock value plummets, and you suddenly realize that the one who promised to protect you has left you alone.

This is the tragic story of the Arab countries of the Persian Gulf region, especially the UAE, in the recent US war against Iran. For decades, backed by Western support, they implemented various plans for economic progress and development, but at a critical historical juncture, they were left alone. Now the question is, how have Washington's hollow promises in military security led the UAE and other Arab allies of the US in West Asia into a mirage and shattered their economic dreams? It is a question whose answer must be sought in their economic statistics.

* A full-fledged economic catastrophe

The UAE is one of America's closest allies in the region, and it was a staunch supporter of the aggressors during the US and Israeli aggression against Iran. Now this war has brought a full-fledged economic disaster to the country. According to Emirati sources, the value of the Dubai stock market has fallen by about 16 percent and Abu Dhabi by about 9 percent, and a total of about $120 billion has been wiped off the value of the UAE's two main markets. The tourism sector, which accounted for 12 percent of the UAE's GDP, has faced a 60 to 80 percent drop in bookings.

Unfortunately, the UAE thought it was safe under America's security umbrella; now it sees that this umbrella has not only failed to protect it but has turned it into a clear target. Dubai was promoted for years as a safe haven for investors. But the war has shattered that image. Schools have closed, foreign families have left the country, hotels are empty, and tourism industry workers' salaries have been halved. This is a direct blow to the UAE's economic model, which was based on attracting foreign investment and tourists.

* America's hollow promises have dragged UAE into fire

Now the question that arises is, why does the UAE remain alongside the US despite all these losses? The answer is clear: because of promises that were not backed by action. For decades, America told Arab countries: "Give us a military base, buy weapons from us, and we will protect you in return." The UAE believed. It handed over Al Dhafra Air Base to the US, bought billions of dollars of American weapons, and introduced itself as a strategic ally of Washington. But when the war started, the US not only failed to protect the UAE but entered a war without coordinating with the UAE, a war of which the UAE also became a victim.

The severe economic damage to the UAE from this war is not limited to the fall in stock values or tourism. The closure of the Strait of Hormuz has also rendered the country's ports—which were the main hubs for distributing goods among Gulf ports—non-functional, and even the country's oil production and exports have experienced a sharp decline.

These developments occurred in the shortest possible time, even though America had promised its allies that by blockading the Strait of Hormuz and sanctioning Iranian oil, it would bring Tehran to its knees. But the result was the opposite. The closure of the Strait of Hormuz also disrupted the oil exports of Arab countries. Qatar stopped its gas production, the UAE's oil production fell by between 500,000 and 800,000 barrels per day, and Kuwait and Bahrain declared states of emergency.

The bitter reality is that even if the war ends tomorrow, the damage inflicted will remain for months and years. Rearranging insurance for oil tankers will take months, and even Goldman Sachs analysts have predicted that some Arab countries will experience GDP declines of up to 14 percent.

* Investors who preferred flight over staying

Financial markets are among the sectors that react most quickly to war. Global investors typically move toward lower-risk assets during periods of uncertainty. This same behavior creates immediate pressure on the UAE's stock and bond markets. During periods of regional tension, the Dubai stock market typically records "2 to 6 percent weekly volatility," and this volatility is more severe in companies tied to trade, transport, and tourism. On the other hand, increased credit risk causes "corporate borrowing costs to rise by up to 0.8 percent." This increased cost is particularly challenging for large-scale projects that require external financing.

This situation also puts pressure on attracting foreign direct investment (FDI). The UAE had attracted about $23 billion in FDI in 2023, but market data shows that during periods of uncertainty, capital inflows slow down and investors tend to postpone their decisions.

Hence, one of the bitterest consequences of the war for the UAE is the flight of foreign investors. According to Arab media reports, about $120 billion has been wiped off the value of the UAE's two main stock exchanges. The tourism sector faces a 60 to 80 percent drop in bookings. Also, the direct damage to the UAE's infrastructure is estimated at between $60 and $200 billion.

The reason investors flee is clear: investors seek security. When they see that a country is directly involved in a war and becomes a legitimate target due to its logistical and military support for the aggressors, they no longer see that country as a "safe haven for investment." So much so that it can be said the "Dubai brand," which took years to build and advertise, has been seriously damaged in a few weeks.

The economic crisis that has befallen the UAE was beyond its imagination. That is why in the early days of the ceasefire, the UAE turned to the very same Americans who had dragged it into this mess to prevent a larger crisis. Emirati officials in Washington requested currency swap lines (access to dollars in times of crisis). Interestingly, media reported that Emirati officials warned behind the scenes that if you do not give us dollars, we will be forced to change our oil transactions to Chinese yuan. This was a covert but serious threat.

* Why is UAE highly sensitive to geopolitical shocks?

A recent International Monetary Fund report has shown why the UAE's economy is more sensitive to regional uncertainty than many other countries:

· High dependence on maritime trade; over 90% of imported goods are supplied by sea.

· The large share of tourism in the economy, which is highly vulnerable to psychological shocks.

· Significant reliance on foreign capital flows; investor decisions are heavily dependent on risk conditions.

· Large-scale projects requiring international financing.

· Relative dependence on energy revenues, making oil price volatility important.

These factors mean that security shocks simultaneously affect multiple sectors and increase the intensity of economic pressure.

That is why economic observers believe that war and geopolitical uncertainty have created a kind of "multilayered risk" for the UAE, simultaneously affecting trade, tourism, financial markets, and economic expectations. These risks manifest themselves through rising transport costs, falling capital flows, reduced willingness to travel, and financial market volatility, and can put pressure on economic growth in the short to medium term.

* Other Arab countries: main losers in the arena

Of course, the UAE is not alone. Other Arab countries that sided with the US or were targeted because of the US military presence on their soil have each suffered losses in their own way. Qatar, the world's largest liquefied natural gas producer, has lost its main facilities. According to statistics, Qatar's annual loss is estimated at about $20 billion, and it may take years to return to its previous capacity.

Kuwait's GDP is predicted to fall by up to 14 percent, and although Saudi Arabia has suffered less damage, its economic growth is still predicted to decline by about 6.6 percent.

Saudi Arabia, which played a lesser role in this war, is now exploiting the crisis that has hit the UAE. Riyadh is implementing its "Vision 2030" plan to become the region's economic hub instead of Dubai, and the war has provided an opportunity to attract capital fleeing the UAE.

Apart from the fact that the main loser of the military aggression against Iran is the United States, according to economic statistics, it must be said that the White House's regional allies, who had seen off Trump with an abundance of precious gifts over the past year, are now wrestling with the gifts they have received from America's war against Iran.

The US war against Iran has taught the Arab countries one bitter but true lesson: that alliance with the US is neither a guarantee of security nor a guarantor of economic profit. The old order of the region has changed forever, and if economic growth is to occur in the region, it must be for all regional actors. The real losers are those who yesterday considered America their savior and today are left alone under the rubble of an economic crisis.

MA

(Translation of an IRNA report)