There are 14,000 Russian companies registered in the UAE, and 150,000 Russians live there. Without the need for visas and the can-do attitude to business, Dubai has become a favourite destination for Russian entrepreneurs escaping from sanctions imposed on the homelands. What was supposed to be an island of prosperity has been hit hard by Iranian missiles and plunged into chaos. That makes for a bad business environment.

Russian companies operating in the Middle East have slowed investment activity and postponed deals following the outbreak of war in the region, with Dubai’s status as a key business hub coming under pressure as foreign firms reassess risk.

Private businesses across the Gulf have largely put negotiations on hold, according to Kommersant, which reported on March 28 that while many European and US companies had already exited Dubai, Russian firms were attempting to maintain operations despite mounting disruption. They don’t have anywhere else to go. However, sustaining pre-conflict levels of activity has proved difficult.

A month after the escalation began, companies continue to delay transactions, Ratmir Proskurnov, partner at international law firm UCL and head of the international regulatory practice told Kommersant.

“Of course, tourism and logistics suffered. The UAE is a major hub for both. Some investors considered moving their assets to other jurisdictions. In the first days of the escalation, some players tried to transfer funds but were unable to do so due to the banking sector being down; it was effectively shut down. However, to their credit, many banks' applications were restored fairly quickly,” he said.

Real estate activity has also weakened, with investors adopting a wait-and-see approach. “We've seen a decline in the Dubai developer stock index, especially in the early days. The market itself is currently somewhat stagnant. This means potential investors are waiting for a better discount, but are also wary of delaying their purchase decisions until the market recovers. Sellers, meanwhile, are waiting for the military to end and demand to recover,” Proskurnov added.

Saudi Arabia, which attracts roughly $30bn annually in investment and aims to raise that to $100bn, could face significant pressure if the conflict persists, according to sources cited by the publication. Maxim Shashenkov, Managing Director of Rusd Investment Bank and Vice President of the Russian Middle Eastern Society Foundation, said job losses were likely. “Will there be layoffs? Yes, there will be, 100%. This will primarily affect companies involved in tourism, logistics, hosting all those endless conferences, as well as influencers of various kinds,” he said.

He added: “It's clear that when there's a war, people who were trying to open offices or build businesses temporarily put their projects on hold.”

In the UAE the property market has been hit hard, after an initial blip. Developers have begun offering incentives to sustain demand.

“It's unlikely that anyone has yet decided to exit the business completely. Everyone is still in a holding pattern because it's impossible to predict anything,” said Ilya Antipov, head of investor relations at Tranio Capital. “There hasn't been a price collapse, but the number of transactions is certainly decreasing. Everyone is still waiting, but there's no real panic. The one sector that's really struggling is the HoReCa sector: restaurants are seeing significantly fewer customers.”