Rising fuel and food costs drive UAE inflation as rental pressures ease.
Fuel is where most people in the UAE first notice inflation. The price is set once a month, applies in every emirate, and reached its highest level of the year in October. Dubai’s September figures show how far the price rise has spread beyond fuel. Food inflation rose to 8.05% from 7.39% in August, its highest reading this year, with pulses and vegetables still 20% above a year earlier. Fuel for personal transport was 37.5% higher than a year ago, up from 31.3% in August, and transport as a whole rose to 14.7% from 12.7% in August. Rents went the other way: housing inflation eased to 6.23% from 6.70%, its fifth monthly decline in a row. Fuel has worked its way into food, and food is now the category still rising while the earlier pressure from rents cools, said Nagham Hassan, Market Analyst at etoro.
The Central Bank of the UAE, in its quarterly review of the economy published on 30 September, expects inflation across the country to average 2.4% in 2026 and 1.9% in 2027. That is nearly double last year’s 1.3%, and still about half the global rate the IMF puts near 4.7%.
Falling air fares mask continued pressure from fuel and food
Dubai gives the clearest monthly view because it publishes consumer prices every month. September’s headline was 5.03%, down from 5.54% in August and a June peak of 5.66%, and the index fell slightly on the month. That dip is less reassuring than it looks. It came from air fares and holiday packages falling back from their summer highs, with air fare inflation dropping to 13.5% from 23.2% in a month, while fuel and food kept rising.
Why is Dubai at 5% when the country is forecast at 2.4%? Each emirate builds its own price basket to match how its residents spend. Housing, for example, is the largest item in Dubai’s basket at roughly 38%, against about 34% in Abu Dhabi. Early this year Dubai’s rents were also rising faster, above 7% against under 5% in Abu Dhabi. A larger share of spending going to the item rising fastest is part of what keeps Dubai’s reading above the national forecast. The national rate averages every emirate, each with its own basket and its own rents, fuel and food prices, so Dubai pulls it up without setting it.
Rising oil prices test the central bank’s inflation outlook
The central bank’s forecast rests on four things. One is already showing in the data: housing costs are moderating, as the bank expected. Two are policy tools it relies on, regulated prices on staple foods and close monitoring of key consumer prices. The review also notes that wages are not chasing prices, with average pay in June below a year earlier even as jobs grew 11%, which also keeps prices in check. The fourth is an easing of global cost pressures, meaning oil and shipping, and that one is outside the central bank’s control. When the report was issued, oil had cooled off. Brent was near $84 a barrel in July, and the forecast probably assumed it would stay around that level until the end of the year. It did not. Brent averaged around $110 in September, and pump prices have risen for three months in a row.
The central bank’s forecast needs a second half in which oil eases and prices follow. Halfway through that second half, oil is higher, fuel is at a yearly high and food inflation in Dubai is still climbing. The 2.4% national figure may still prove right if the last quarter is calm; what the data since September shows is that the margin for that has narrowed.
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