Istanbul Gains as Gulf War Disrupts Dubai, But Capital Holds Back
By Bosphorus News Economy Desk
The Iran war has disrupted Gulf operations, shaken confidence in Dubai as a regional hub and opened a debate that Turkish officials, business circles and outside analysts are approaching from very different angles. Istanbul is gaining ground. The harder question is where that gain begins and where it stops.
The clearest movement is in logistics, not finance. Epson has shut its Dubai warehouse and is routing deliveries through Türkiye, bypassing the Strait of Hormuz. The company's Asia commercial operations vice president, Suat Özsoy, said products from the Far East will be sent directly to Türkiye and distributed from there for the next three to four months. Epson has also opened a 700 square metre office in Istanbul's Emaar district. Xiaomi has likewise shifted logistics operations from Dubai to Türkiye, with its Türkiye marketing director Shaw Gu describing the country not simply as a market but as a hub. Dubai-based port operator DP World has also moved in that direction, merging with Turkish operator Evyapport and repositioning parts of its Asia-Europe-Middle East trade flows around Türkiye's land and port infrastructure rather than the Gulf sea route.
These are real decisions by real companies. But they do not prove that financial capital is following. Taylan Büyükşahin, editor-in-chief of financial portal tclira.com, drew the distinction clearly in remarks to Bosphorus News. Türkiye, he said, is currently one of the safest points in the region for trade to continue through secure routes, so logistics activity is likely to rise for a period. Capital flows, however, operate on a different timetable and by different rules.
Ankara is trying to turn that logistical opening into something larger. Treasury and Finance Minister Mehmet Şimşek said on April 10 that work to transform the Istanbul Finance Centre into a hub for managing global funds is at an advanced stage and would be submitted to the president for approval. Bloomberg reported on April 9 that a draft bill extending Istanbul Finance Centre incentives nationwide is expected to reach parliament in the coming weeks. The package includes a 50 percent tax deduction on profits from goods sold or brokered abroad, corporate tax reductions on financial services exports, exemptions from banking and insurance transaction taxes, and income tax exemptions of 60 to 80 percent for certain personnel.
The message from the centre itself has been similar. IFC chief executive Ahmet İhsan Erdem told Reuters that more than 40 companies have held "safe haven" discussions since the war began, while also acknowledging that none has yet taken a concrete relocation step. President Recep Tayyip Erdoğan hosted 40 global chief executives at a World Economic Forum meeting in Istanbul earlier this month, with BlackRock chief executive Larry Fink among the organisers. WEF acting president Alois Zwinggi said Türkiye is taking on a more strategic role in trade, investment and production networks.
Government messaging in Türkiye has gone further than the more cautious market read. Pro-government media framed the current moment as proof that the Istanbul Finance Centre is beginning to realise the strategic vision first promoted during Berat Albayrak's tenure, arguing that war risk in the Gulf has accelerated interest from Gulf and Asian companies and given Istanbul a fresh opening as a regional base. The narrative reflects Ankara's attempt to turn geopolitical disruption into institutional advantage, but it runs ahead of the evidence. Interest is not the same as relocation, and relocation is not the same as durable capital commitment.
That is the optimistic case. The harder evidence points to a much wider structural gap. The Global Financial Centres Index published on March 26, 2026 ranked Dubai seventh in the world. Istanbul stood at 101st, down 13 places from the previous edition. It was not placed among the global centres group at all, but classified instead as an "international contender." DW Türkçe also reported that private office space at the Istanbul Finance Centre is about 60 percent vacant. An international banker quoted anonymously by Middle East Eye put the problem more bluntly, saying that "nobody trusts Turkish courts."
Dubai's advantage is not just branding. The Dubai International Financial Centre operates under its own civil and commercial framework based on English common law, with independent courts, an arbitration centre and its own regulator. It offers zero corporate and personal income tax, guaranteed for 50 years, full foreign ownership without a local sponsor and unrestricted capital repatriation. Türkiye offers none of that. Economist Güven Sak of the Economic Policy Research Foundation of Türkiye said creating a comparable dual legal structure would be extremely difficult to push through politically, given the country's long sensitivity to arrangements seen as granting foreign economic privilege.
The macro picture adds another layer of hesitation. Büyükşahin said Türkiye would need to provide a genuine environment of trust within a stable macroeconomic framework if it wants to attract foreign investment and capital at the desired scale. Inflation at around 25 percent, elevated risk premiums and continuing macroeconomic uncertainty remain live deterrents for long-term money. Economist Dr. Sinan Alçın told DW Türkçe that the liquid portion of Gulf wealth has in large part already gone elsewhere, particularly to Singapore and the United States, while much of what remains is concentrated in real estate. A European investment adviser cited by Middle East Eye pointed to the arrest of Istanbul Mayor Ekrem İmamoğlu as another signal that weakens confidence in the rule of law.
That does not mean there is no opportunity. It means the opportunity is narrower than the headline claim. Doç. Dr. Filiz Eryılmaz told Türkiye Gazetesi that capital is now in a wait-and-see position and that the critical window is three to six months. If the war ends and Ankara moves decisively on incentives, some flows could follow. But Istanbul is not competing only with Dubai. It is also competing with Singapore, London and Hong Kong. Güven Sak argued that the most realistic target may be Chinese firms heavily invested in the UAE's Jebel Ali Free Zone, which sits directly across from Iran. With the right incentives, he said, Türkiye could attract part of that activity. Its industrial base and access to a domestic market of 85 million people are concrete advantages that Dubai cannot replicate.
Prof. Dr. Burak Arzova, writing in Ekonomim on April 10, made the central point plainly. The opportunity is real, he argued, but the framing is not. A country that continues to debate its own legal practices cannot easily present itself as the natural destination for capital seeking safety and predictability.
This is where the strongest criticism should sit. The problem is not that the government is trying to capture a strategic shift. It should. The problem is that Türkiye keeps trying to monetise geopolitical opportunity without fully correcting the domestic distortions that prevent temporary openings from becoming permanent gains. Logistics can move quickly because geography works in Türkiye's favour. Capital does not move on geography alone. It asks harder questions about rules, trust and durability.
Istanbul is gaining because the region is under stress and Türkiye is available. Dubai still leads because its system remains more legible, more predictable and more trusted by international capital. Until Ankara closes that credibility gap at home, every external shock will create the appearance of opportunity, but not the sustained capital shift those claims imply.
If Türkiye is serious about capturing this shift, closing these structural gaps matters far more than turning the moment into domestic political messaging.