Think about Dubai and you probably picture great weather, sandy beaches, luxury hotels and modern cities.
Until very recently, Dubai was heralded as an international economic success story. It had experienced a major property boom and billions were being pumped into a variety of developments, all designed to turn Dubai into a trading and service centre for the Gulf region.
The bubble appears to have burst.
Yesterday a move by the State-owned Dubai World to delay paying some of its debt pile had a big impact on global stock markets. In the UK, the FTSE 100 index of leading company shares closed down 170.68 points (or -3.18%). Other world markets displayed similar behaviour.
It is important to note that Dubai World has not defaulted on its $22bn mountain of debt. At least not yet. What triggered panic in the markets yesterday was their intention to defer repayments for six months and the fact that their wealthy (oil rich) emirate neighbour Abu Dhabi did not step up back the debts.
Problems were compounded by the closure of the US stockmarket for Thanksgiving Day and a technical glitch at the London Stock Exchange (LSE), preventing automated trading for several hours.
The big question now is just how much exposure the British banks have to this increasingly bad looking debt. UK banking shares had a difficult day yesterday, with RBS, Lloyds and HSBC all holding syndicated loans for Dubai World.
Today could be ‘interesting’ for global investment markets. The Dow Jones is back open, but with an abbreviated session for stock trading. It is ‘Black Friday’ today in the US, traditionally the start of frantic Christmas season shopping. There is every chance that today could be renamed ‘Red Friday’ when markets open later.