Dubai inflation climbs in September as Iran war pushes up fuel cost

In September, Dubai's inflation increased by 5.03% on an annual basis, as fuel and transport costs rose due to tensions between the US and Iran. This was a slower rate compared to the previous month's 5.54% annual increase and the peak of 5.7% in June. The Dubai Data and Statistics Establishment reported these figures on Tuesday.

Meanwhile, Dubai's general monthly consumer price index fell by 0.05% month-on-month, thanks to lower air fares and cheaper holiday packages. Airfares dropped by 23.44% and holiday packages fell by 12.47% from the August level. However, transport costs were the main driver of the inflation rise, climbing 14.7% in September. This was due to a 37.52% increase in fuel and lubricant costs for personal transport and a 13.48% rise in air passenger transport.

Transport accounts for 9% of Dubai's Consumer Price Index basket and has been the main contributor to inflation in recent months. The UAE has been lifting fuel subsidies since 2015, with petrol prices increasing for a third consecutive month due to elevated global oil market prices. Global crude prices, which surged nearly 109% during the war peak, are still over 70% higher due to fears of a possible resumption of fighting between the US and Iran.

Brent crude hovered around the $110 per barrel mark in September and has remained above $100 in recent weeks. The Strait of Hormuz has been a flashpoint due to increasing attacks on Saudi infrastructure by Houthi rebels in Yemen, adding more risk to energy supplies from the region. Despite these challenges, Dubai's economy has largely avoided the deeper slump seen in other regional economies.

Non-oil private sector business activity in Dubai has maintained a growth trajectory, with the Purchasing Managers' Index standing at 54.5 in September, up from 54.1 in August. The tourism and retail sectors have also rebounded from the initial shock of the war. Property prices and food and drinks categories have also seen increases, with food and drinks up by 8.05% annually and housing, water, electricity, gas, and domestic fuel rising by 6.23%.