Walk through Dubai's gold souk on any given day and the glitter is hard to miss. However, behind the gleaming displays a quieter story is unfolding. Gold jewellery demand in the UAE fell 40% in the first quarter of 2026 hitting a nearly six-year low driven by the regional military conflict.
According to World Gold Council data, jewellery demand declined to 4.7 tonnes in the January to March 2026 period compared to 7.9 tonnes in the same period last year. The last time numbers looked this bleak was during the Covid-19 pandemic when the world was locked indoors and Dubai's airports stood empty.
Gold shopping in Dubai has always been as much a tourist activity as a local one. When visitors stop coming the counters go quiet. The decline in tourist arrivals amid the regional conflict weighed heavily on jewellery sales as foreign visitors account for a significant share of gold and precious metal purchases particularly in Dubai.
The outbreak of war involving the US, Israel and Iran on February 28 led to a sharp drop in sales during March 2026 turning what had been a steady quarter into a difficult one for retailers across the market.
Not all gold demand is falling. Residents are simply buying differently. Demand for gold coins and bars increased sharply rising 27% year-on-year in Q1 2026 to 4.0 tonnes compared to 3.1 tonnes during the same period last year.
Residents have increasingly shifted away from jewellery purchases and towards coins and bars as investment assets anticipating further gains in precious metal prices. It is a classic wartime reflex. When uncertainty rises people reach for hard assets, not heirlooms.
Gold prices peaked earlier this year but have been trending downward since the war began amid concerns over higher US inflation. Analysts warn that further escalation could add more pressure.
As one market expert noted, gold remains vulnerable to a sharp reversal given the lack of any near-term prospect for a comprehensive settlement to the Middle East conflict causing liquidity flowing into the precious metal to dry up from both ETFs and physical jewellery demand worldwide.
For now, the gold souk waits. The metal is still valuable. The question is simply who is buying it and why.