DUBAI—For most of the day Saturday, tourists and residents relaxed on Dubai’s glitzy Palm Jumeirah, tanning on the man-made beaches and throwing birthday parties for their children—even as the U.S. and Israel struck targets in Iran and inbound Iranian missiles were being intercepted over the Persian Gulf.
But just after dusk, the mood began to change. A loud explosion shook apartment buildings, and a thick column of smoke churned from an impact site near fancy hotels along the Palm’s trunk. People ran screaming down the beach as interceptors engaged missiles along Dubai’s cosmopolitan coast and the smell of gun smoke hung in the air.
For decades, the Arab states of the Persian Gulf sold themselves as an oasis of peace in a region prone to conflict, attracting wealthy expats, multinational corporations and investment.
On Saturday, Iranian explosives pierced that lucrative bubble. Missiles and drones rained down on Qatar, Saudi Arabia, Bahrain and the United Arab Emirates, targeting bases and other strategic sites and scattering debris from intercepts.
The attacks marred the business-friendly reputation Gulf countries took years to build.
“A conflict like this has the clear potential to unnerve international businesses operating in the Gulf,” said Michael Ratney, who served as U.S. ambassador to Saudi Arabia under the Biden administration. “That’s both because it can freak out their expatriate staffs, at least some of whom will want to leave, and because it calls into question the basic sense of security and stability on which they based their decision to operate and invest there.”
Tehran unleashed a barrage of missiles against nearly all of the U.S. bases in the Gulf in retaliation for the U.S. and Israeli attack, according to senior Arab officials.
The move followed warnings from Tehran ahead of the war that it would retaliate aggressively and draw the whole region into the conflict. Its goal appeared to be to amplify global alarm, which could create pressure to de-escalate the fighting, said Dania Thafer, executive director of the Washington-based Gulf International Forum.
Thick, black smoke rose at the large U.S. Navy base in Bahrain. A drone damaged the passenger building at Kuwait’s international airport. In a neighborhood housing migrant laborers in Qatar, people ran screaming as a projectile fell from the sky. A fireball erupted when it landed, engulfing the street, according to footage published by Al Jazeera.
Bahrain’s government said that several residential buildings in the capital, Manama, and another city were hit by drones and fragments from an intercepted missile, and that firefighting and rescue operations were under way.
Explosions popped in the air over touristy Dubai and oil-rich Abu Dhabi in the U.A.E., where a resident was killed by falling debris.
The attacks closed airspace, canceled flights and led to scrambles at the region’s busy airports.
Many people in Dubai, the overwhelming majority of whom are foreign nationals drawn by the city’s reputation for safety, were unsure what to do next. Unlike Israel, Dubai has no network of shelters or carefully calibrated alert levels, leaving people to fend for themselves. No air-raid sirens were heard in Dubai as missiles collided with interceptors overhead.
Nervous residents in Dubai’s Palm and Marina developments hurried onto their balconies to get a glimpse of the action. People still out exercising or running errands shared video of intercepts and damage in the city’s ubiquitous chat groups.
The U.S. Embassy issued a shelter-in-place recommendation for Americans in the U.A.E. The country’s airspace was temporarily closed. Some people rushed to grocery stores to stockpile goods, though motorcycles delivering takeout meals and groceries continued to zip around the city.
“War obviously has the potential to scare away the investors and tourists who are increasingly central to the economic ambitions of Gulf states,” said Ratney, the former U.S. ambassador to Saudi Arabia. “War also creates unpredictability and volatility, both of which are poison for countries making major investments.”
Many international companies operate in the Arab Gulf’s consumer, finance and energy businesses—particularly in the U.A.E., which has become the commercial hub for the region.
Neighboring Saudi Arabia has long worried that regional unrest could disrupt its ambitious economic development plan, called Vision 2030, which aims to brighten the kingdom’s global image, woo international tourists and high-skilled expatriates, and wean the kingdom off its reliance on oil.
Conflict also threatens the U.A.E. and Saudi Arabia’s giant investments in artificial intelligence and data centers.
Iranian officials had passed messages to Gulf states directly and through diplomatic intermediaries ahead of the war that they would be hit if the U.S. attacked Iran.
Arab leaders responded by guaranteeing that their airspaces wouldn’t be used by the U.S. for attacks. Some are now discussing opening their airspace for U.S. military use as Iran continues to target their countries, Arab officials said.
“If the Iran-U.S. conflict is not settled, or we’re entering a prolonged crisis with multiple military incidents, or even if the Islamic Republic is destabilized in the long-term and not replaced by a stable regime, this would compound the initial shock in a way that will shape the region for months if not years to come,” said Michael Horowitz, a geopolitical and security analyst. “This is the Gulf’s nightmare scenario.”
Write to Omar Abdel-Baqui at omar.abdel-baqui@wsj.com and Summer Said at summer.said@wsj.com