Dubai Real Estate Market Takes a Hit: 20% Drop Wipes Out 2026 Gains Amid Iran Conflict

The Dubai Real Estate Index has erased all the gains it made this year as the ongoing war between the United States (US) and Israel against Iran spills over into one of the world’s top real estate destinations.

The DFM Real Estate Index has fallen 20 per cent in the past five sessions. The index had risen 15 per cent in calendar year 2025 (CY25), after gaining 63 per cent in CY24 and 38 per cent in CY23. The index had touched a peak of 16,910.3 on February 27 this year, just before tensions in West Asia escalated.

The shake-up in the real estate stocks comes right after a record-breaking real estate cycle. In 2025, real estate transactions in the emirate reached nearly AED 917 billion (about $250 billion), the highest in the city’s history, while total transaction volumes crossed 270,000 deals, reflecting deep investor participation and market liquidity, as per data analysed by Anarock.

Since 2021, housing prices in Dubai have risen roughly 60-75 per cent, making the emirate one of the strongest-performing global property markets in the post-pandemic cycle, Business Standard reported earlier. Indian nationals account for around 20–22% of all foreign property purchases in Dubai, making them the largest overseas investor group in the market.

Rental yields also remain appealing. Prime Dubai residential assets typically generate annual rental returns between 6% and 9%, among the highest in major global property markets. These yields continue to attract both long-term investors and wealth preservation buyers from India.

The risk-off for the stocks came as the US and Israel fired missiles across Iran last week, with the Supreme Leader Ayatollah Ali Khamenei being killed. Iran responded with strikes against Israel, as well as US bases and other targets in states including Saudi Arabia, Qatar, the United Arab Emirates (UAE), Kuwait, and Bahrain.

US crude prices jumped 35 per cent last week, while Brent crude rose 28 per cent. So far this year, West Texas Intermediate and Brent crude prices have climbed 98 per cent and 88 per cent, respectively. Meanwhile, Iraq, Kuwait, and the UAE have cut oil production as storage tanks fill up amid reduced capacity to export crude, according to media reports. Iran, Israel, and the US have also targeted oil and gas facilities since the war began, further intensifying supply concerns.