With luck, the Dubai debt fiasco will be the disaster that wasn't, but the Gulf State's recent financial sandstorm hasn't completely abated. And it could mark the starting point of another round of global turbulence.

After regional stocks took a dive last week amid spotty information on the crisis, Sheikh Khalifa bin Zayed Al Nahyan, president of the United Arab Emirates, said Tuesday the country s economy was in good shape and praised Dubai s ruler, Sheikh Mohammed bin Rashid al-Maktoum. That helped calm a regional panic, but hasn't resolved the problems for Dubai World, investment arm of the sheikdom's government.

"I don't think Dubai itself is large enough for its problems to become a systemic risk" to the world economy, says Jason Trennert, an investment strategist and founder of Strategas Research Partners. "And I don't foresee a situation where Abu Dhabi's going to let Dubai fail. But we may be whistling past the graveyard for other reasons."

The nature of Dubai World s troubles could keep the fallout localized, but they may foreshadow another round of financial woes rooted in real estate. Unlike the residential mortgage crisis that caused the United States to reset abruptly from its easy-credit-fueled housing bubble, a looming wave of trouble is about to break through in the commercial real estate sector.

Dubai shows how real estate has such a strong effect on global economies now, says Jack McCabe, an independent real estate analyst and president of McCabe Research & Consulting in Deerfield Beach, Fla. I would make a strong case that the U.S. housing recession -- and depression in a number of markets -- triggered the U.S. economic recession, which triggered the global recession. Now, he says, Dubai is a warning beacon for the next real estate bubble one made of offices and retail spaces for which anywhere from $750 billion to $2.2 trillion in cheap financing will come due within the next three years. That debt was used to finance all kinds of developments around the world, both directly and through commercial mortgage-backed securities. When it comes due, the global recovery may well be in a world of hurt.

During the boom, everything doubled in value when it shouldn't have, and all of that was facilitated by credit, not by an increase in real value, McCabe said. Now we're going to see the effects in the commercial markets, and it s going to be very severe. So many of these projects were financed with five- to sever-year financing, and that's just now coming up to be refinanced. But now, the money s not there.

The immediate effects of this regional real estate bust will be felt globally by shareholders of HSBC, Royal Bank of Scotland and Standard Chartered. This trio of United Kingdom banks make up a large proportion of the U.K. contingent that comprises the 57% of foreign bank exposure to the UAE. That amounts to about $87 billion in loans, according to Bank of International Settlements data. In contrast, U.S. banks have only about $10 billion in direct exposure, CreditSights analyst John Raymond says.

Those loan-backed projects are now worth 30% to 50% less than their original values, which means most of the debt incurred to build luxury hotels, high-priced condominiums and shopping malls is now financing depressed assets. That s a bad bet in any region, but it s especially bad for a boom economy like Dubai s.

McCabe, a Floridian, likens Dubai s building boom to Miami s: Cheap foreign money drove overdevelopment that begat more development, all because it was an easy place to park money after the dot-com crash of 2001.

They wanted to make Dubai one of the great cities of the world, and they wanted to do it overnight, or at least in a 10-year period, McCabe says. Real estate became the No. 1 investment, and it wasn t due to real demand; it was due to artificial demand and speculation and easy financing for development and purchases.

The Dubai World debacle could also portend a more far-reaching problem than the collapse of foreign loans and soon-to-be-deserted shopping malls. Sovereign wealth funds like Dubai World and other direct investment arms of governments like Singapore, South Korea, Kuwait and even Norway, which are charged with investing foreign currency reserves, have been big buyers of commercial mortgage-backed securities over the last seven years.

These are the same commercial mortgages that are about to go belly up, McCabe says.

Dubai may be the most massively overbuilt market in the world, he says, but it s not the only one, and the global nature of real estate investing means that the Middle East s woes could easily be replicated in London, Sydney, Prague or Barcelona. Real estate financing is world-wide, and that means we're going to have defaults on a massive scale, he says.

If there s a bright side, it s that U.S. banks have already taken most of the hits they ll suffer for their overextension into real estate, says Richard Bove, a banking analyst at Rochdale Securities. He calls this a rare instance of U.S. banks learning from past mistakes.

"The lesson learned in the 1970s and 1980s was that investing overseas was a perilous pursuit for American financial institutions," he wrote Friday. "Therefore, universally they wrote down their exposures in developing nations and got out. Even large institutions like Citigroup and J.P. Morgan Chase may have backed away."

But as the knock-on effects of the last 18 months have demonstrated at great cost, what the optimists see as a regional sandstorm could break loose and become a global storm of an entirely different variety.