What the US Midterms Mean for the Middle East and Dubai’s Housing Market

According to the Associated Press, Democrats won majorities in both chambers of the incoming Congress. That will make it harder for Donald Trump to secure support for a prolonged military campaign against Iran. Negotiations and military pressure could continue even after control of Congress changes. For Dubai, the main question is whether the region can avoid an escalation that disrupts the UAE’s infrastructure. Associated Press

The new majority can step up oversight of the administration and seek to restrict funding for military operations. That could slow the implementation of White House decisions and affect the scale and duration of the campaign. The president retains his authority as commander in chief and can continue to negotiate. If he vetoes legislation restricting military action, overriding that veto would require a two-thirds vote in each chamber. US Constitution

The incoming Congress’s term begins on 3 January 2027. Until then, the current Congress remains in office. During the transition, the White House may try to increase pressure on Iran to secure concessions before the new majority takes over. The administration also has reason to exercise restraint, since Iranian retaliation could complicate negotiations and raise the economic costs for the US. Twentieth Amendment to the US Constitution

The midterms showed how American voters view the conflict. In the AP Voter Poll, about six in ten said the decision to take military action against Iran was a mistake. Roughly a third said the war was crucial to how they voted for Congress. More voters said the same about the cost of living and corruption. AP Voter Poll

American households are feeling the economic effects of the war. The Federal Reserve found that the surge in energy prices after the conflict began pushed inflation higher. In September, US petrol prices were 34.2% higher than a year earlier, and annual inflation reached 3.7%. With inflation still elevated, the Fed raised its policy rate by a quarter of a percentage point in September, to 3.75–4.00%, and held it there in October. Federal Reserve Monetary Policy Report, US Bureau of Labor Statistics, September Fed decision, October Fed decision

Expected stock market volatility also rose. In October, the VIX climbed from 16.34 to 19.42. Market swings matter to households with savings invested in shares, including through retirement accounts. According to the Fed’s 2025 Survey of Consumer Finances, more than half of US families held shares directly or indirectly. Cboe, Survey of Consumer Finances

Both parties are likely to make the conflict a campaign issue ahead of the 2028 presidential election. Republicans have an incentive to reach a deal and show that ending the conflict has eased pressure on prices. If the war continues, Democrats will likely campaign on a promise to end it. That strengthens the political incentive to find a way out, while the terms of any deal still depend on negotiations with Iran.

For now, negotiations and military pressure are proceeding in parallel. AP reported that the US carried out limited strikes on 2 November. A Qatari delegation held talks in Tehran that same day. Qatar confirmed that the sides had exchanged proposals, and on 5 November Oman said it was discussing measures with Iran to ensure safe navigation. Commercial ships continue to pass through the Strait of Hormuz, though traffic remains below normal levels. Associated Press, Qatar Ministry of Foreign Affairs, Oman Foreign Ministry, JMIC / UKMTO

Our base case is that the region will remain unsettled until the parties agree on conditions for safe passage through the strait. However, in our assessment, the risks to the UAE are already substantially lower than they were at the start of the conflict and will continue to ease. A workable agreement on shipping through Hormuz could come before a broader deal on sanctions, Iran’s nuclear programme and regional security. Joint statement by Oman and China

Israel’s position also shapes the discussions. AP reported that Benjamin Netanyahu asked Trump to resume strikes against Iran before the US elections. According to AP’s source, Trump made no commitment. If a broader agreement takes until the next US administration, a change in leadership could shift Washington’s priorities and how it responds to proposals from allies. Associated Press

The UAE continues to restore freight flows through alternative routes. Some containers now arrive at Fujairah and Khor Fakkan, bypassing the Strait of Hormuz, before continuing by road. In the first half of 2026, 2.6 times as many loaded lorries passed through the Hatta border crossing with Oman as in the same period a year earlier. From April to September, Emirates SkyCargo carried only 1% less freight across its network than in the same period in 2025. UAE Ministry of Foreign Trade, Dubai Customs, Emirates SkyCargo

Security risks remain. In August, the UAE reported intercepting an Iranian drone over its territorial waters. In October, the International Maritime Organization recorded damage to a vessel off the UAE coast. However, these incidents were on a much smaller scale than the spring wave of attacks. According to the UAE Ministry of Foreign Affairs, 2,819 missiles and drones were used in attacks on the country during the first 40 days of the conflict. UAE Ministry of Foreign Affairs, 8 April, UAE Ministry of Foreign Affairs, 31 August, International Maritime Organization

Dubai’s medium-term outlook rests on population growth, infrastructure investment and a consistent economic strategy. The UAE continues to pursue diplomatic de-escalation, while D33 and Dubai 2040 set long-term priorities for business, transport and urban development. Dubai’s population recovered after a decline in March and reached approximately 4.82 million by the end of October, up from 4.58 million at the end of 2025. A growing population broadens the base of demand for housing. UAE Ministry of Foreign Affairs, Dubai Economic Agenda D33, Dubai 2040 Urban Master Plan, Digital Dubai, Al Khaleej

The first signs of a pickup in Dubai’s housing market are in completed homes. Sales in this segment rose 13.8% from September to 3,606 in October. Across the market, however, the number of home sales fell 1%, and the price index adjusted for the mix of properties sold declined 0.9%. Buyers became more active in the completed-home segment while prices across the city continued to fall. Projectory, based on Dubai Land Department registrations, PropertyIndex

Davima sees scope for a turnaround in some segments in late 2026 or early 2027. Our base case assumes that the UAE’s cities, ports and airports continue to operate without prolonged disruption. The first sign of a turnaround would be a sustained increase in completed-home sales, followed by stable prices for comparable properties. Around 60,000 homes are scheduled for completion in 2027, so recovery could begin sooner in areas where demand is steady and relatively few new homes are due to come onto the market. Cushman & Wakefield Core