The ongoing military escalation involving the war between the United States of America and Israel against Iran and Iran’s strikes on Gulf Cooperation Council (GCC) countries has introduced some uncertainty for the regional real estate and hospitality sectors. In the initial days of the conflict, we received a significant number of enquiries from real estate investors and other stakeholders seeking guidance. While the situation remains fluid, we have observed that market sentiment has steadied as confidence grows in the capabilities and professionalism of both public and private sector institutions across the region in managing the current circumstances.
Current Geopolitical Developments and Regional Real Estate and Hospitality
Investor sentiment in the real estate sector has shifted towards caution, with off-plan transactions and speculative investments most likely to experience a short-term slowdown. Short-term rental and hospitality assets in tourism heavy areas like Downtown Dubai, Palm Jumeirah and Dubai Marina may face the most immediate pressure given flight disruptions and temporary airspace closures.
Crucially, however, business operations across the region remain ongoing and functional. Governments have moved swiftly to reassure markets, with senior UAE officials publicly demonstrating normalcy and GCC authorities affirming the integrity of critical infrastructure, something we are seeing daily on the ground, it is business as usual although with a layer of additional awareness and caution being exercised by all citizens, residents and visitors.
Practical Considerations for Stakeholders
Developers and Investors should review force majeure provisions, war risk clauses, and material adverse change language in financing documents, joint venture agreements, and construction contracts. Scenario planning around delayed transaction closings or extended due diligence timelines is advisable. Investors should also assess insurance coverage for war, terrorism, and business interruption risks and consider engaging with brokers to confirm policy limits and exclusions.
Notwithstanding the above, it is important to note that it is premature at this stage to conclude that a force majeure event has crystallised for the purposes of most commercial agreements. Despite the prevailing conflict, there has been no major interruption to business operations in the region, with the principal challenge to date being the temporary closure of airspace to certain destinations; a disruption which is expected to be short-lived. Accordingly, stakeholders are strongly advised not to suspend or withhold the performance of their financial obligations, as there is currently no established legal basis to justify non-payment or non-performance under most contractual frameworks.
Where logistical difficulties do arise as a consequence of the current situation, parties are encouraged to engage proactively with their contractual counterparties to seek reasonable extensions of time or adjusted performance schedules. All contracting parties are reminded of their duty to act in good faith and to cooperate constructively in order to navigate this period with minimal disruption and reduced exposure to loss.
Hotel Owners and Operators should review key contractual provisions in hotel management agreements, franchise agreements and other owner/operator agreements. Particular attention should be given to force majeure clauses, termination rights triggered by prolonged operational disruption, the potential effect on any performance test provisions and any operator hotel closure rights. Business interruption insurance provisions, including war risk and terrorism coverage, should also be reviewed with brokers if reduced hotel occupancy ensues. Operational protocols may require updating to address potential airspace closures, supply chain disruptions, and staff welfare and security obligations.
Contractors and Suppliers should assess continuity risks relating to imported materials, insurance coverage for project sites, and contractual protections regarding prolonged force majeure events.
Outlook
Despite short-term volatility, regional fundamentals remain sound. Dubai recorded historically high levels of real estate transactions in 2025, and the market entered this period from a position of considerable strength. Analysts have observed that past geopolitical shocks, including the 1990-91 Gulf crisis, the late 2008 financial crisis and the COVID 19 pandemic, have historically led to a more robust real estate market and more mature laws and relatively swift recoveries, supported by Dubai’s diversified investor base, tax efficient structures, and robust regulatory environment.
We will continue to monitor developments closely. For tailored advice on contract reviews, risk mitigation strategies, or regulatory considerations, please contact your trusted regional advisers.
Key Contacts
Andrew Thomson, Partner, Head of Real Estate, a.thomson@tamimi.com
Mohammed Kawasmi, Partner, m.kawasmi@tamimi.com
Ian Arnott, Head of Hospitality Development, i.arnott@tamimi.com
Kirsty De Sousa, Senior Knowledge Lawyer, k.sousa@tamimi.com