War Batters Dubai’s Financial-Hub Status as UAE Seeks US Currency Swap

The UAE dirham is pegged to the US dollar, while Dubai depends heavily on aviation, tourism and cross-border finance. The war involving Iran in March 2026 disrupted the Strait of Hormuz and air travel, heightening risks to dollar liquidity and capital outflows. A currency swap would allow the UAE central bank to exchange dirhams for dollars to defend the peg and support bank clearing. The Federal Reserve currently maintains standing facilities with only five major central banks.

The Wall Street Journal reported on April 19 that UAE central bank Governor Khaled Mohamed Balama held talks in Washington in mid-April with US Treasury Secretary Scott Bessent and Federal Reserve officials. Trump said on April 21 that he was considering a swap arrangement, though its size has not been disclosed. The UAE said its central bank holds more than $300 billion in foreign-exchange reserves and its sovereign investment assets exceed $2 trillion, stressing that the proposed facility would be a precautionary dollar backstop.