The European stock markets took a hit yesterday after fears surrounding Dubai's debt problems spread. The FTSE 100 index suffered its worst one-day hit since March falling by 3.2% and banking shares took a battering as investors worried about their exposure to the debt-laden emirate, £48 billion in debt to be precise.
Almost £14billion was wiped off the value of Britain's biggest banks yesterday as the financial crisis in Dubai sent shockwaves around the world. Investors were further spooked by reports Dubai's neighbour Abu Dhabi will not step in to help this time round. Speculation that European banks are exposed to roughly half of Dubai World's debts caused their shares to collapse.
But what will these debt fears mean for London property?
Property investors and brokers are talking up the prospect that the sale of financial investment firm Istithmar's international property, could raise hundreds of millions of pounds.
Dubai World's investment arm has investments in Adelphi on the Strand and the Grand Buildings in Trafalgar Square, in London.
Istithmar sold two developments in the West End last month to Great Portland Estates for much less than it paid for them two years ago.
It is thought that it will retain a share of the profits in the buildings in Regent Street and near Oxford Street.
King Sturge said prime international real estate was more likely to raise cash quickly than domestic assets and there would be a "feeding frenzy" for some of the buildings in the West End.
UK Property investors are drawing up lists of the property assets of the various Dubai property arms. P&O, which DP World owns, has a £1bn global property portfolio.
A minority stake it has in Elizabeth House next to Waterloo station is for sale as is the majority ownership of Morgan Stanley real estate funds.
The crisis could also stem the flow of Middle Eastern investment into the capital, something which has been protecting the market by propping up investment sale volumes. But it would be to soon to panic. Not all Western interests in the emirate will be affected and there is still the likelihood that Dubai will pull through this and return to growth.
We should wish it all the best, writes Allister Heath of City A.M., because if it fails, the lesson that many in the Middle East will draw from the crisis is that openness to foreigners, peace and trade don't work. The only winners then would be the extremists - and then we would all be in real trouble.