The world has always worked this way. When crisis erupts in one place, opportunity knocks somewhere else. Disaster strikes in the West — and fortune smiles on the East.
The United States recklessly launched military strikes against Iran — and Iran hit back hard. Tehran not only blockaded the Strait of Hormuz, it also struck multiple Middle Eastern countries hosting US military bases, including Dubai in the United Arab Emirates. Dubai was once a paradise for the global wealthy — scorching 40°C heat outside, pure extravagance inside. That world is now gone.
It started on February 28. Iranian drones struck Fairmont The Palm — a six-star hotel sitting on Dubai's iconic artificial Palm Island. Tourists suddenly understood a brutal truth: even the most lavish six-star hotels in Dubai had no missile defense protection.
Dubai International Airport was also hit. Massive fuel storage tanks exploded in fireballs visible from across the entire city. The airport shut down. The rich and powerful were trapped — and even tens of thousands of US dollars couldn't buy a seat out.
When Guns Fire, Property Dies
Don't think this has nothing to do with Hong Kong. Quite a few Hong Kong people own property in Dubai. A friend of a friend bought a flat there for tens of millions of dollars — when asked why, the answer was vague at best. Maybe Hong Kong people just love buying property: after London, why not Dubai?
The moment the gunfire started, Dubai's property market went into freefall — everyone wanted out at once. In just over ten days, the Dubai Real Estate Index (DFMRE) crashed 31.8%, plunging from 16,900 at month-end to 11,864 and wiping out every gain made this year. But even that staggering drop doesn't capture the full picture. Daily transaction volume collapsed from over 800 deals to just 23 — a 97% plunge. People desperate to sell simply can't find buyers. Some estimate prices would need to fall more than 70% to clear the market. Luxury hotel occupancy has dropped below 19%. Jumeirah Beach, once packed with tourists, now stands completely deserted.
What made Dubai so magnetic? Two things above all: taxes and neutrality. Dubai levies zero personal income tax — no matter whether it's salary, investment income, or rental income. Compare that to Hong Kong's 15% salaries tax. Dubai’s corporate tax sits at 9%, but profits below AED 375,000 (roughly HKD 830,000) are also taxed at zero, versus Hong Kong's 16.5% profits tax. Companies registered in designated free zones doing foreign business pay nothing at all. Add zero capital gains tax, zero investment income tax, and zero inheritance tax — Dubai was, in every sense of the word, a wealth haven.
Dubai is one of seven emirates in the UAE and the second-largest after Abu Dhabi. As oil revenue dried up, Dubai pivoted hard — pouring investment into finance, trade, real estate, and tourism as its new economic pillars.
Dubai's Formula Was Working
That strategy paid off spectacularly. Last year alone, nearly 10,000 millionaires relocated to Dubai, bringing an estimated US$63 billion in wealth with them.
Getting in was easy. Buy property worth over AED 2 million (about HKD 4.5 million), put down just 20%, hold temporary ownership papers — and you qualify for residency. When the Russia-Ukraine war erupted in 2022, an estimated 200,000 Russians poured into Dubai, transferring over US$20 billion in funds.
In short, Dubai sold prosperity, stability, and low taxes — and lived off what you might call "war dividends." When other countries fell into turmoil, people rushed to Dubai. Even Switzerland, once the gold standard of neutrality, effectively abandoned that status by joining Western sanctions against Russia in 2022. That decision only made Dubai look more attractive by comparison.
Now America has pulled the trigger — and Dubai has paid the price. Its sense of security evaporated overnight. The wealthy never imagined missiles would actually strike their hotel towers. As people flee, capital will follow. Investors are already predicting that Hong Kong and Singapore will emerge as the biggest winners.
Hong Kong Ready to Catch the Wave
Hong Kong's advantage is clear. The National Security Law, enacted in 2020, restored stability. Over the past two years, Hong Kong has rebuilt and expanded its financial markets — laying the foundation to absorb serious capital when the opportunity finally arrives.
The lesson this story teaches us is simple: safety and stability truly matter above all else.
Lo Wing-hung
Bastille Commentary
** The blog article is the sole responsibility of the author and does not represent the position of our company. **
"It's the economy, stupid!" This phrase comes from Bill Clinton’s 1992 US presidential campaign.
At that time, President George H.W. Bush enjoyed high approval for winning the Gulf War, but the US economy had slipped into recession. Clinton’s strategist, James Carville, zeroed in on this vulnerability, posting the slogan "It's the economy, stupid!" on the campaign headquarters wall. It mocked the idea that no matter how dazzling a candidate’s foreign policy victories, voters ultimately cared most about their economic well-being—what was on their dinner table.
Trump ignited this Middle East conflict, which is now spiraling out of control, and once again, the underlying problem remains the economy.
An Energy War
First, an energy war. On March 18, Israel struck Iran’s South Pars gas field, triggering a major blaze and severe damage. The Iranian Revolutionary Guard quickly issued an urgent warning, declaring five oil and gas facilities across Saudi Arabia, the United Arab Emirates, and Qatar as legitimate targets. It threatened attacks within hours and urged civilians in the region to evacuate.
Iran soon launched large-scale missile strikes on Qatar’s Ras Laffan Industrial City oil and gas facilities. According to Qatar, Iran fired five missiles, with their defense systems intercepting four; one landed and caused a significant fire. Qatar condemned Iran’s attack on this industrial hub as a serious escalation.
The Iranian Revolutionary Guard released a statement calling the operation a direct and equal retaliation for earlier attacks on Iran’s energy infrastructure. The stated goal was to target “you (the US) and your allies' energy infrastructure”.
The Guard emphasized Iran initially sought to avoid expanding the war into the energy sector or harming neighboring economies, but provocations forced the conflict into a “new phase.” Their statement warned if attacks persist, Iran will widen strikes to all energy infrastructure belonging to US and Israel allies until they are completely destroyed.
Trump clearly understands the gravity of the situation. US officials say he was warned in advance about Israel’s planned attack on Iran’s South Pars gas field and expressed support, aiming to send a message to Iran in response to its blockade of the Strait of Hormuz. But these officials add that Trump believes Iran has already received the message, so he currently opposes Israel continuing attacks on Iran’s energy infrastructure.
Trump appears powerless against Iran’s blockade of the Strait of Hormuz, while Israel has seized the moment to escalate the conflict. When Iran retaliated similarly against Qatar’s gas fields, Trump resisted further escalation, fearing widespread panic.
In fact, the crisis already threatens multiple Middle Eastern economies. On March 18, the UAE Central Bank launched a massive liquidity injection, approving a plan to stabilize its banking sector with funds totaling 1 trillion UAE dirhams—an enormous $270 billion bailout. This reveals how seriously the UAE views the risks as the crisis deepens.
An Economic War
Second, an economic war is underway. Militarily, Iran ranks as a third-tier power, so it fights the US by pushing up oil prices to strike back economically. Its blockade of the Strait of Hormuz sent international oil prices soaring, with US oil futures hitting a high of $99, driving US inflation higher.
As expected, the Federal Reserve held interest rates steady at its March 18 meeting, but markets now focus on the Fed’s outlook for rate cuts this year. The Fed’s dot plot forecast remains unchanged, projecting one cut in 2026 and another in 2027. Although the forecast is stable, the market had expected two cuts in 2024, possibly starting as soon as June—expectations now seem very unlikely.
The Fed raised its inflation forecast for 2026 from 2.4% to 2.7%, expecting it to ease to 2.2% in 2027. After the meeting, many financial institutions adjusted their outlooks, pushing back the anticipated date of the first rate cut from June to September or October, predicting only one cut this year. Analysts believe the ongoing US-Israel-Iran conflict, pushing oil prices higher and stoking inflation fears, is forcing the Fed to adopt a more cautious monetary policy. The chances of US rate cuts are fading, with global economic repercussions that extend to Hong Kong
Since last year, Hong Kong's property market has bounced back from its low point. Without the outbreak of the Iran war and if the Federal Reserve had started cutting interest rates as early as June, Hong Kong would likely have followed with rate cuts, potentially driving property prices even higher. Now, with the odds of rate cuts diminished, the property market faces renewed pressure.
Trump has launched a conflict in Iran that he cannot control. Does this fool still fail to see that the problem lies squarely in the economy? Even George H.W. Bush, who triumphed in the 1991 Iraq War, confronted such a dilemma—how much more difficult for the blundering Trump?
Lo Wing-hung
