UAE consumers count cost of war with warning of worse to come

• Fastest price rises in 11 years
• Supply chain pressure deepens
• Tourism businesses among worst hit

UAE consumers are feeling the impact of the Middle East conflict, with economists warning price pressures could intensify in the months ahead.

Businesses raised prices at the fastest pace for more than 11 years in March, according to the latest purchasing managers’ index from S&P Global Market Intelligence.

Companies are moving to protect margins against rising costs and drawing down inventories to fulfil orders as the Strait of Hormuz disruption hits supply chains, said David Owen, senior economist at S&P.

“Like the increase in prices, this could be exacerbated over the coming months if supply lines remain fractured,” Owen said.

Business confidence has slipped to a 61-month low, according to S&P, with sectors exposed to tourism among the hardest hit as the conflict drags on.

Dubai restaurateurs have already warned of potential closures by the summer as weaker visitor numbers and tighter spending squeeze margins.

Naim Maadad, founder of Gates Hospitality and chairman of the Australian Business Council Dubai, said price increases across his restaurants would be held back in April but forecast double-digit rises “across most sectors”, with knock-on effects for inflation.

Abhishek Rajput, a consultant at Redseer Middle East, said more than half the 300 respondents in its latest UAE survey were concerned about food inflation. Just over three-quarters said grocery costs had increased in recent weeks.

Authorities have taken steps to cushion the impact. The Central Bank of the UAE has loosened liquidity rules and expanded access to funding for lenders, while Dubai has launched an AED1 billion ($272 million) support package for businesses, including a three-month deferral of government fees.

Higher fuel costs are adding to the strain for consumers and businesses. UAE petrol prices have been increased by about 30 percent this month. Diesel is up 72 percent.

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“It’s going to get worse in May when we take into account the increased fuel costs,” said Adnan Haroon, founder of finance and management consultancy Bimac Group.

He said further intervention might be needed to limit the impact. “It’s good that they have given some relaxation on fees, but my personal view is they have to control the price, or consider more packages, on fuel,” he said.

Katy Keenan, chief executive of the British Chamber of Commerce Dubai, said disruption to the emirate’s events calendar could shift pricing later in the year.

“In this scenario, hotels will be in a strong position to raise prices to understandably recoup losses, which will in turn increase sponsorship costs and ultimately impact businesses and brand presence,” she said.