Part 2: Missiles Over Dubai
The data has turned, the narrative has not
[two minute read]
Incoming data suggests the conflict is decelerating.
An investment opportunity is emerging.
The Data
Since the war started on February 28th, daily attacks from Iran on neighboring countries have steadily declined:
Major regional airports are returning to pre-conflict baselines:
The data suggests Iran has limited firepower to escalate the conflict.
While Iran can potentially keep the Straight of Hormuz closed, the primary impact will be on energy prices.
Trump Reaction Function
U.S. midterm outcomes have shifted in favor of the democrats since the conflict started:
Even prior to the conflict, support for Trump’s policies was declining, including within the republican party:
Trump is under pressure to end the war.
UAE
The S&P500 is just 3.9% below its all time high, however the iShares MSCI UAE ETF (ticker ‘UAE’) is down 18% from its recent all time high.
The ETF offers investors a pure play bet on the United Arab Emirates, with a PE ratio of just 9.0x and a 4.0% dividend yield.
Having lived in Dubai earlier this year, I’m optimistic on the future of the UAE.
The country benefited from material inward population migration and inbound investment following the COVID pandemic, principally driven by the positive perception of how the government handled it.
Despite a challenging geography, I have reason to believe the UAE will emerge stronger from this conflict as well.
The Trade
In April of 2025, the UAE ETF broke out to a new all time high above decade long resistance.
The current selloff looks like a retest of that breakout, offering investors an entry point at price levels first seen back in 2014:
Trump has a pattern of escalating his agenda either right before he pivots or as negotiations become constructive.
If the same behavior pattern plays out or new negative headlines emerge, we can expect another leg down to $16-17 (red line in my chart above). Will former resistance become support?
Conclusion
Let’s review what we have established:
Iran’s firepower has diminished, suggesting the regional conflict is unlikely to escalate
Trump is under political pressure to end the war
The UAE ETF is down 18% from its recent all time highs
Trump has a pattern of escalating his agenda close to its conclusion
Another leg lower in UAE would offer investors an attractive entry point, nearly 25% off the recent all time highs
By the time the narrative confirms it, the entry point might be gone.