The ongoing US-Israeli strikes on Iran, along with Tehran’s retaliation across the Gulf, have produced one of the most severe disruptions to global energy markets in decades. The looming threat of Iranian sea mines and missile attacks has brought commercial tanker traffic through the Strait of Hormuz to a near standstill. Energy shipments from the Middle East have been at a standstill following Iran's threats to attack vessels that pass through a critical trade waterway as retaliation against US-Israeli strikes. Escalating hostilities have brought ship transits close to a halt, triggering immediate reactions in global energy markets.
Before the latest escalation, tourism had been one of the most dynamic engines of Middle Eastern growth. Dubai reported record visitor arrivals in both 2024 and 2025 and average hotel occupancy close to 80 percent, according to publicly available tourism statistics. Bahrain and parts of Saudi Arabia were investing heavily to capture rising leisure demand before the conflict.
The US-Israel war on Iran has forced her to either fire her staff or cut their wages.
The conflict corridor stretching from Gaza to the Gulf has abruptly altered the tourism trajectory. After the war erupted on February 28, the airspace in the region was closed and holidays were cancelled, causing local businesses to suffer. Occupancy of Dubai hotels fell to 16% last week, down from the normal seasonal average of 90%, according to the Financial Times. There are reports of single-digit hotel occupancy in once booming destinations from Dubai to Jordan. Travel industry forums, local media and sector analyses describe a sharp fall in new bookings, widespread cancellations from key long haul markets, and hotels facing half empty lobbies. In some pockets, particularly where travel advisories have tightened, hoteliers describe occupancy figures in the single digits.
Dubai hotels are experiencing a sharp decline in bookings and rates. Travel concerns stemming from the Wesia conflict have impacted occupancy, pushing prices down significantly. Luxury rooms are now available at a fraction of their usual cost. According to m.economictimes.com, a hotelier working at a luxury hotel in Dubai described hotel occupancy dropping to around 20% last week with this week's forecast in single digits. Another person familiar with the situation described average daily rates dropping by 50% week-on-week.
Her restaurants popular with both locals and tourists have had revenue drops of more than 50%, while those that depend more heavily on tourists have declined by 70% to 80%.
War has upended the tourism industry in the city, as it has across the Gulf, with hotels shutting floors or entire buildings, cutting staff costs, and offering steep discounts to residents as they prepare for a prolonged slump. According to Daily Express - Main, Natasha Sideris described being forced to either fire staff or cut wages due to the conflict. She chose to cut salaries by 30% for all staff, including herself, rather than fire 30% of her staff. Tasha's hospitality group manages 14 businesses across the UAE and employs more than 1,000 people. According to Daily Express - Main, a senior executive at a restaurant chain described footfall dropping to 15-20% of normal, causing it to put over half its staff on unpaid leave and temporarily shut some outlets.
Months of escalating conflict across the wider Middle East are reshaping regional travel patterns. Published economic assessments link the latest war to a broader slowdown in regional service industries, with tourism singled out as especially exposed. The once bustling city has turned into a 'ghost town', with photos on social media showing deserted beaches and empty sunloungers. According to Daily Express - Main, one local described normally gridlocked Friday traffic and busy restaurants now replaced by a ghost town atmosphere.
Footfall at its outlets has dropped to 15-20% of normal, causing it to put over half its staff on unpaid leave.
The Strait of Hormuz carries around a quarter of global seaborne oil trade, along with significant volumes of liquefied natural gas and fertilizers. About a fifth of the world's oil passes through the Strait of Hormuz - around 20 million barrels each day, according to estimates from the US Energy Information Administration. Oil prices have at points soared to close to $120 (£90) a barrel. The blockade has led to a global oil shortage which has rocked Gulf-reliant Asian countries hard.
According to the Aggregated Gas Storage Inventory database, European storage levels are currently below 30 percent, a five-year low. A colder-than-average winter, combined with increased gas burn in the power sector, pushed European gas demand up nearly 7 percent since the start of the year. Pipeline year-over-year exports from the European Union to Ukraine surged more than tenfold, further accelerating withdrawals. Under EU regulations, storage levels must reach at least 90 percent capacity by December.
The restaurant chain has already shut down a few outlets temporarily, and the rest are operating with minimal staff.
China uses an estimated 15 to 16 million barrels of oil daily, various market analysts told the BBC. Gulf countries are a major source of the oil China ships in, with barrels from Saudi Arabia and Iran accounting for more than 10% of its imports each, according to the US Energy Information Administration. Russian oil accounts for nearly a fifth of China's energy imports. Coal is the dominant source of power for most of China's electricity, and is available in abundance locally, with China being the world's largest coal producer accounting for more than half of global production.
Crude oil prices increased by nearly 40% between February and March. The price of liquefied natural gas shipments to Asia rose by almost two-thirds. Nitrogen-based fertilizer prices increased by nearly 50% in March. UN estimates indicate oil prices have risen by around 45 per cent and gas by 55 per cent since late February, with fertilizer prices up 35 per cent.
Normally on Friday, traffic would be gridlocked and restaurants and shops would be very busy, but the place is a ghost town now.
Supply risks are spreading from energy into fertilizers and other critical agricultural inputs. Shortages of helium and specialised gases from the Gulf are creating a 'near-immediate crisis' for semiconductor and advanced electronics production. Disruptions to petrochemical feedstocks threaten manufacturing across major Asian economies. Fertilizer shortages are raising concerns about future crop yields across South Asia – home to nearly two billion people – and beyond.
Higher transport and insurance costs are adding to the strain. The impact is being felt across all sea routes, with major shipping companies suspending services to the Middle East and containers stranded in congested ports. At least 20,000 seafarers in the region are also affected.
They have heard from friends that at some big hotels and resorts, bosses have told staff to take their paid leave now because there are hardly any guests.
In Sri Lanka, authorities have introduced fuel rationing and cut back public events to conserve supplies. Schools in Sri Lanka have shifted to a four-day week, while public sector operations have been scaled down. The Philippines is mandating four-day work weeks to save fuel. In Pakistan, fuel and grocery prices surged overnight, and long queues reported at petrol stations. Indonesia is seeking ways to avoid burning through reserves that will last just weeks.
The immediate impact is visible in sharp increases in transport costs, energy and fertilizer prices, alongside currency pressures and financial market volatility. Regional inflation could rise to 4.6 per cent in 2026, up from 3.5 per cent in 2025. The resulting market volatility has contributed to weakening currencies in emerging economies and heightened fears over inflation, raising the likelihood of tighter monetary policies and slower economic growth.
Hotel occupancy had dropped to around 20% last week and this week's forecast to be in single digits.
The heads of the International Energy Agency, International Monetary Fund, and World Bank Group have agreed to establish a high-level coordination group to respond to the far-reaching energy and economic fallout from the ongoing war in the Middle East. In a joint statement, the three institutions warned that the conflict has caused 'major disruptions' to livelihoods across the region and triggered one of the largest supply shortages in the history of global energy markets. They said the impact is 'substantial, global and highly asymmetric', with energy-importing nations, particularly low-income countries, bearing the brunt of rising costs and economic strain.
The World Bank Group is working with governments and the private sector to address challenges arising from the Middle East conflict as shipping route disruptions and rising costs hit emerging markets. The institutions also highlighted disruptions to global supply chains, including key commodities such as helium, phosphate and aluminium, as well as setbacks in tourism caused by flight interruptions at major Gulf transit hubs. The effects are already being felt worldwide through surging prices of oil, gas and fertilisers, alongside growing concerns over food inflation.
Rates and occupancies ‘were somewhat down.’
Hotel operators expect the profile of tourists to shift to lower-budget travelers from Asia and Africa, in what would be a return to the clientele Dubai used to attract before it became a global luxury destination. Chains such as Indian Hotels Company and Lemon Tree Hotels have properties in Dubai. According to m.economictimes.com, Patanjali Govind Keswani described rates and occupancies as 'somewhat down', while Manav Thadani noted February revenue per available room declined by up to 25% on some days compared to last year.
The duration of the severe downturn in Dubai's tourism and hospitality sectors remains uncertain, with businesses preparing for a prolonged slump. Diplomatic efforts to de-escalate the conflict and reopen the Strait of Hormuz have not been detailed, though international bodies are coordinating responses. The full extent of the impact on global supply chains beyond energy and fertilizers, including for electronics and manufacturing, continues to unfold as the conflict persists.
February is typically a strong month for hotel performance in Dubai, but revenue per available room declined by up to 25% on some days in the latter half compared to last year, resulting in overall revenue per available room being 3-4% lower for the month.