Iran fears not denting Gulf boom

By Andrew Marshall

DUBAI (Reuters) - Fears that the standoff between the West and Iran may spark a regional conflict have not yet dented an investment boom in the Gulf, but a major escalation could be a serious economic blow, regional business leaders say.

"So far it is not affecting business. Investment and construction are going on," George Nasra, chief executive of NBK Capital, National Bank of Kuwait's (NBKK.KW: Quote, Profile, Research, Stock Buzz) investment banking arm, told the Reuters Middle East Investment Summit this week.

"But if there is a serious escalation, all bets are off."

Regional tensions have been further stoked by Iran's seizure of 15 British sailors in Gulf waters last week.

"The market should be prepared for risk of conflict," ING said in a daily research note.

The proximity of Gulf Arab countries to Iran, and fears that Iran could retaliate to any U.S. or Israeli military strike by attacking targets in U.S.-allied Gulf states, mean that conflict over Iran could destabilize the whole region. Iran is building a nuclear power station in Bushehr, not far from Gulf neighbors.

"What worries us is that the Bushehr nuclear reactor is 115 km from Kuwait," Nasra said. "So it's serious."

The six Gulf Arab states have seen a spectacular economic boom over the past five years on the back of surging oil prices. One reason for their success has been the perception that they are havens of calm in a turbulent region.

A conflict on their doorstep could undermine that, scaring away investors, businesses and tourists.

But business leaders at the Reuters summit said the region had weathered similar crises before -- the overthrow of the Shah of Iran in 1979, the Iran-Iraq war in the 1980s, the first Gulf War in 1991 and the U.S.-led invasion of Iraq in 2003.

"INTERESTING NEIGHBORHOOD"

"We've had lots of different conflicts in this part of the world. We live in an interesting neighborhood," said Waleed al-Mokkarab al-Muhairi, chief operating officer of Mubadala Development, an Abu Dhabi government investment firm.

"But we've always managed to preserve (our) stability and make the UAE a haven for investment. I see no reason why that's not going to continue."

Muhairi said Iran concerns had not yet affected his firm's investment decisions. "So far it hasn't stopped us doing anything," he said. "But obviously we're concerned."

Gerald Lawless, executive chairman of luxury hotels group Jumeirah which is owned by the ruler of Dubai, said his company had crisis plans in place but he did not expect severe turmoil.  Continued...