A Study on UAE State Capacity and Strategic Hedging, Based on 2024 Data
Dr. Ecaterina MATOI, Dr. Flavius CABA-MARIA
1. A June 2026 study review
This study emphasized on UAE’s transformation from a rich oil economy into a sophisticated global energy actor, trade power and logistics hub, as well as an aspiring regional and global geopolitical leader and military supplier. The research was developed around long-term data and patterns, and does not encompass effects of 2026. US-Israeli aggression on Iran, and the resulting war that impacted Persian Gulf Arab states. Although long-term impact of this war requires new data sets, not available as of June 2026, and future research, changes in Emirati geopolitical and business dynamics can be reviewed based on preliminary data.
As revealed by post-February 2026 developments in the Middle East, neither was the war on Iran a bilateral or trilateral one, nor were state actors such as Persian Gulf Arab states, Jordan, or non-state actors such as Hezbollah, completely isolated from the developments in Iran. The significance of a potentially fundamental shift in American-Iranian relations cannot be underestimated in terms of impact on global energy flows and trade development, in the superpower competition framework but also in the regional power balance context.
1.1 A review of Emirati state capacity and hedging as of June 2026
According to media reports, the Emirati population dropped with 1.2 million in March 2026, as a result of war spillover (Ganediwalla, 2026). The population recovery model from cited media report hints at a short-term 40 % recovery triggered by jobs and wages, while the remaining recovery requiring up to 24 months, conditioned by the establishment of a safety premium. From the 240,000 British nationals residing in Dubai, approximately 30,000 left the UAE after February 28th, 2026 (Bhaimiya, 2026).
Media reports debate whether the “Dubai dream” was paused or interrupted, but irrespective of the time dimension of disruption, its existence is acknowledged across the board. The Emirati government reacted with visa overstay period extension and relaxed re-entry rules as relief measures (E&Y, 2026), along a set of economic relief packages, such as loan classification flexibility, relation of capital buffers and liquidity support (Varghese, 2026).
The fiscal policy and post-oil economic consolidation process did not appear to be significantly impacted by the war as of June 2026: since growth remains relatively less dependent on tax revenues, the Emirates maintained the fiscal flexibility to stimulate economic growth even in times of crises, as exemplified by measures such as 50 % reduction on industrial licenses for food and pharmaceuticals in Sharjah, introduced in early June 2026 (The National Sharjah, 2026). On long term, the UAE apparently continues to balance between the gradual transfer from a non-taxed economy to a taxed one on one hand, and global competitiveness in selected key sectors on another hand.
Abu Dhabi, Dubai and the smaller Emirates from UAE will certainly invest in recovering the stability and opportunity image that transformed them into global economic players, but any initiative can, at best, restore UAE’s pre-war image and not the global power balance based on the old hedging strategy between Asian business and American security guarantees.
On May 1st, 2026, the UAE ended 59-years old Organization of Petroleum Exporting Countries (OPEC) Plus membership. Whether this decision was awaiting before the conflict for a trigger, and the war from Iran served as a justification, or it was indeed justified at economic level as of April 2026 is debated in reports, with arguments for both hypotheses (MECouncil, 2026). UAE’s approach to crude and refined petroleum markets reportedly differs from the Saudi one, as their policies on Abraham Accords or the conflict from Yemen did.
After the rift between GCC partners and Qatar appears to have quenched after 2017, a much more systematic divergence appears to accumulate between Persian Gulf leading economic powers, as the transfer to environmentally sustainable economies and American expansion of control over hydrocarbon resources and trade accentuate. While departing OPEC+ may allow the UAE to capitalize on its production capacity, should the situation in the Hormuz Strait stabilize, this would impact Saudi oil price strategy and cooperation with other large energy producers such as the Russian Federation. Besides the potential fragmentation of a formerly strong energy block, that was able to negotiate with the US in a relatively sovereign manner, Persian Gulf energy powers may be impacted by a potential new regional competition paradigm resulting from an imminent understanding between the US and Iran, the latter possibly resulting in larger Iranian energy exports and consolidation of competing trade routes.
Saudi Arabia Railways (SAR) announcement on five new logistics routes in April 2026 (SPA, 2026) does not fully depart from the India-Middle East-Europe Economic Corridor (IMEEC) initial plan, but it emphasizes the strengthening role of Saudi large ports such as Jubail Commercial Port, King Fahd Industrial Port, and Dammam King Abdulaziz Port, the latter challenging UAE’s established business model by reclaiming the re-export role the Emirati Jebel Ali port played in recent decades.
Furthermore, Saudi Arabia signed an agreement with Türkiye in early June 2026 on the construction of a major regional railway through Jordan and Syria, that might expand to Oman as well (Bachner, 2026). Consequently, Riyadh signalizes resolve in its approach to regional affairs, conditions an apparently strong Emirati-Israeli bid to work towards IMEEC connectivity irrespective of progress in projects such as the two-state solution, competes Emirati connectivity hubs, and insulates itself from potential new problems in the Persian Gulf.
As of June 2026, the UAE remains entangled in the dichotomy between its oil business in Asia and defense dependence on American defense umbrella and weapons delivery, along Israel and France. On one hand, the UAE remains a core participant in the mBridge cross-border settlement project that China prepares to roll out as alternative to traditionally dominating, dollar-dominated, Swift system (Jha, 2026). On the other hand, the US approved a $ 7 billion package for the UAE in March 2026, including Patriot PAC-3 missiles and CH-47 Chinook helicopters (Reuters UAE 2026, 2026). In May 2026, the UAE and Israel established a fund for joint defense acquisitions as part of a defense partnership, that became even more visible with the deployment of Israeli Iron Dome in the UAE after February 2026 (Global Defense Corp, 2026).
1.2 A review of Emirati gateway components as of June 2026
Despite the strong measures enacted by UAE government to tackle war’s effects, Abu Dhabi National Oil Company’s (ADNOC) chief executive Sultan al-Jaber stated that even in the case of a quick end to the conflict, a full recovery might be achieved by middle of 2027 (Winkley, 2026).
Abu Dhabi Investment Fund (ADIA) reportedly prioritized liquidity after February 2026, did not hold investments and pivoted towards projects in Asia, particularly China (Hancock, 2026) (SWF, 2026). These developments are consistent with Emirati BRICS membership, the adoption of mBridge and the wider pivot to Asian economic integration.
In early May, reports were hinting at 11,000 flights cancelled across the Persian Gulf region due to the war from Iran, and a relatively short term recovery to 44.6 % from pre-war levels of air traffic in the UAE in the period 1 -12 March, 2026 (Kupemba, 2026). While the data hints at significant resilience, it also signalizes a significant disruption of fights. Likewise, As of April 14th, 2026, 279 ships passed the Strait of Hormuz since the beginning of war, and 22 ships were attacked (Ali, 2026).
This represented a significant decrease from an average of 138 ships per day before the conflict (Chetam, Menon, & Copeland, 2026), a more than 95 % decrease in ship transit. The vulnerability disclosure may be overridden by the UAE on medium and long term, but the episode exposed a liability likely to impact trade depending on safe and reliable logistics, insurable at relatively low premiums and delivered with minimal risks.
While the war from Iran may end with a sustainable peace, which represents a desirable situation for Emirati logistics entrepreneurship, deeper regional rifts such as uncoordinated participation in the Abraham Accords or diverging approaches to global crude petroleum price remain potential conflict sources. Consequently, the risk of Emirati trade and travel services disruption that was emphasized by the war from Iran remains present, amid growing competition from alternative connectivity projects like the ones championed by Saudi Arabia, Türkiye, and potentially Iran in the future.
In the list of technological targets that the Iran’s Islamic Revolutionary Guard Corps (IRGC) reportedly published, two Emirati companies, i.e. G42 and Spire Solutions, appeared near targets such as Amazon Web Services (AWS, reportedly hit by Iranian drones in the UAE and Bahrain), Cisco, Oracle, Microsoft, Palantir, etc. (Sertin, 2026). While G42 is a key component in Emirati Artificial Intelligence strategy, Spire Solutions emerged as a cybersecurity provider, that among others, entered a cooperation agreement with XM Cyber, an Israeli cybersecurity company cofounded by former Mossad director Tamir Pardo, that aims to serve the Persian Gulf market (Gilead, 2021) after Abraham Accords had been signed.
Besides the expansion of cooperation with Israel, the Emirati EDGE group launched a subsidiary in France in June 2026 (Gavilan, 2026) registered in Paris and with manufacturing in Bordeaux. This represents an acceleration of cooperation with European defense environment, in line with previous cooperation programs initiated in Spain, and a significant embeddedness when compared to Türkiye’s scope of cooperation with Spain in programs such as Hürjet (Potera, 2026): Emirati investments on French territory signal not only a high level of long-term trust, but also an alignment in defense industry development goals.
The Emirati security and defense industry gateway components gained importance in the context of American-Israeli war on Iran. At strategic level, this development exposed limits of cooperation frameworks such as the Abraham Accords, that instead of pacifying the region resulted in exposure to disruption, loss and increased risks for the UAE. The Emirati defense industrial complex is still small and less threatening for neighbors such as Iran or Saudi Arabia, but it appears to accelerate growth. Hence, on middle term, a new security dilemma may emerge in the region should the UAE maintain the pace in defense investment and trade.
1.3 Preliminary considerations on the impact of war from Iran on UAE as of June 2026
According to preliminary data available for the period March – June 2026, the direct effect of war on UAE’s growing prominence in global trade, services, technological and defense industry development appears to be limited. However, it is the shift in development and cooperation paradigms that emphasizes a potentially significant risk for the UAE as leading business and trading hub. The impact on gold market for example, that experienced price anomalies (SANA Metals, 2026) and a collapse in local jewelry demand (Cabral, 2026), is relatively limited in time, assuming that logistic disruptions will be limited in the future.
However, reputation of the Emirates as a very safe place has been clearly impacted, and industries depending on stability and unwavering security may reconsider their long-term investments. On the other hand, businesses benefiting from structural advantages the UAE offers, or opportunities that this unique operating environment creates, are less likely to downgrade their position in global markets by moving to other jurisdictions.
Finally, the outcomes of the war from Iran, and growing regional competition may impact Persian Guld economies and their development speed irrespective of internal policies. While there is no significant cooperation between Saudi Arabia and Iran, neither of these two big UAE neighbors appears to support Israeli expansion in territory or influence as the UAE directly or indirectly does. Furthermore, Riyadh remains consistent in the security stance it adopted after Israeli jets bombed Doha in September 2025: the Kingdom signed a defense cooperation with Pakistan, but this bilateral framework’s expansion throughout the region is demonstrated by the quadrilateral talks in Cairo between Pakistan, Türkiye, Saudi Arabia and Egypt as of June 2026 (Keskinkilic, 2026).
It is not only the absence of UAE that stands out, or that of any other signatory of Abraham Accords, but the size of armies of countries meeting in Cairo, and the advancing role of Pakistan in Middle East affairs, a relentless mediator between the US and Iran and an increasingly important security actor in this region. Therefore, while UAE’s pathway to dominance remains clear and less directly affected, the context of regional cooperation and development dynamics is gradually changing, without a clear outcome in sight except for growing competition.
2. Introduction
The United Arab Emirates (UAE) is both an oil-rich country and one of the fastest emerging economies developing, implementing and monetizing digital technologies. Unlike the United States (US) or Israel, the UAE had as of November 2025 a Ministry of Industry and Advanced Technology and a Ministry for Artificial Intelligence, Digital Economy and Remote Work Applications (u.ae Cabinet, 2025).
The Emirati independence culminated with a meteoric rise of oil price, that lasted until 1980 and propelled the small country among countries with highest Gross Domestic Product (GDP) per capita in the world during this period. The legacy of high income was carried out by the UAE throughout the next two decades amid instability in the oil market, and since the 2000s, the country began to grow multilaterally amid a sustained development and economic diversification policy.
During the 1990s, the UAE was not yet a major arms exporter, and the world was still engaged in post-Cold War disarmament. In 1998, India and Pakistan conducted nuclear tests, and the 2001 War on Terror (WoT) signalized renewed and emerging rivalries. After 2001, it became clear that the world was not anymore on the path of demilitarization. After 2010, the UAE gradually became “world’s largest humanitarian donor” for five consecutive years (2013-2018) (ReliefWeb UAE Donor, 2018) in terms of percentage from Gross National Income (GNI) and a major arms importer, as well as exporter. The change in Emirati posture has been characterized by literature as a shift from “neutrality to power projection” (Slijper, 2017).
A potential definition of success depends on metrics and angle of observation, but irrespective of the framework adopted, Dubai continuously ranked as the world’s busiest airport for international passengers since 2014, Emirati iconic infrastructure projects dominate worldwide headlines and the Emirati Hope probe reached Mars in February 2021. There are clear indications of Emirati breakthroughs in various domains, amid an oscillating global stability, which are extraordinary when the size of Emirati population is considered.
This study aims to analyze the emergence of a power-projecting UAE after 2001, the patterns and particularities of its economic, military and technological development, in order to identify similarities and relations to traditional and emerging powers, as well as great powers or small states that exert significant influence on the global stage.
The full study is available below:
The study’s cover page was created with AI assistance,for illustrative purposes only. Cover image credits: Darcey Beau via Unsplash. For illustrative purposes only.
Dr. Ecaterina MATOI is the President of Strategic Dialogue for Global Affairs Initiative.
Dr. Flavius CABA-MARIA is the President of Middle East Political and Economic Institute from Bucharest, Romania.