US President Trump’s decision to launch a war against Iran has set off a financial crisis spreading relentlessly, much like a virus.
On March 18, Israel attacked Iran’s South Pars gas field, sparking a massive fire. Iran swiftly retaliated by striking Qatar’s Ras Laffan industrial gas field with a missile, hitting key facilities.
The damage was far worse than anticipated. Qatar’s Energy Minister and CEO of Qatar Energy, Saad al-Kaabi, revealed the strike crippled 17% of Qatar’s liquefied natural gas export capacity, projecting annual revenue losses of $20 billion. This threatens energy supplies to Europe and Asia, with full repairs estimated to take 3 to 5 years.
The fallout rattled Trump, who immediately declared he would no longer target Iran’s energy infrastructure. What began as a missile exchange triggered consequences expected to last years, while the risk of the conflict spilling over continues to grow.
Private Credit Market Under Strain
The United States now faces another looming financial explosion: the private credit market. Recent turbulence has sent shockwaves through Wall Street, rattling private credit funds. Major US banks have begun tightening lending to these funds, while anxious investors scramble to redeem their stakes. The rapid withdrawal of capital has forced fund managers to impose redemption limits.
On March 16, Morgan Stanley restricted redemptions after investors sought to pull nearly 11% of shares from one of its private credit funds. Other firms like BlackRock, Blackstone, and Blue Owl Capital have also clamped down on investor withdrawals, sending anxiety through the market.
Private credit funds have surged in prominence in the US in recent years, though the concept itself is not new. Private credit generally means loans made to companies by non-bank lenders. It’s essentially equivalent to Hong Kong’s “money lenders” market, which has long existed. But after the 2008 US financial crisis, banks faced stricter regulation and gradually exited high-risk lending markets. Private credit then capitalized on that void and expanded rapidly.
Private Credit's Hidden Risks
As private credit expands, investment banks spot profit opportunities in the middle, running funds that attract capital with high interest rates and then lending to private companies. These private credit funds typically offer annualized returns of 8 to 10%, drawing many yield-hungry investors. But buying private credit funds carries greater risk than junk bonds. These funds depend solely on the fund managers’ judgment of loan risks, with little transparency. When capital floods in rapidly, managers often end up extending credit recklessly.
In September last year, auto-related firms Tricolor and First Brands both filed for bankruptcy, causing their private loans to default entirely and raising market alarm over private credit risks. At that time, JPMorgan Chase CEO Jamie Dimon warned that the problems surfacing in private credit are not isolated incidents. Spotting one cockroach usually means there are many more lurking.
Growing Scale and Warning Signs
The private credit market has ballooned to an enormous scale, but it is riddled with "cockroaches"—signs of underlying risks. Federal Reserve data shows outstanding loans to non-depository financial institutions hit $1.14 trillion last year, much of it bank lending to private credit funds. JPMorgan Chase revealed in January that its loans to non-bank financial institutions are projected to rise to $160 billion by 2025, a steep increase from about $50 billion in 2018.
When a high-risk investment market faces a credit squeeze, it often foreshadows a meltdown. Smoke starts rising from the bomb, cockroaches scatter everywhere, and disaster warning signs appear—though collapse is not guaranteed. The crucial question is whether top national leaders, particularly US President Trump, have the resolve to act decisively and extinguish the blaze.
Iran War Fuels Financial Crisis
The Iran conflict is the key trigger behind current market tensions. The United States’ decision to enter this reckless war is dragging it deeper into trouble. If US President Trump fails to pull out promptly, he risks being the one to ignite a financial disaster.
Lo Wing-hung
Bastille Commentary
** 博客文章文責自負,不代表本公司立場 **
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
