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International investors have fled to the safety of the US dollar and treasuries after Dubai World, a giant investment firm controlled by the government, said it could not service its debts on schedule.

Mark Mobius, head of Templeton Asset Management, which manages $25 billion in emerging market assets, is not sure if this will lead to more defaults and wreak havoc on the global financial system, which is just recovering from the 2008 Lehman Brothers crisis.

"If Dubai has to default, that could start a wave of defaults in other areas," he was quoted as saying by Bloomberg.

In fact, the Dubai World debacle should be seen as a major example of exceptional uncertainties in the global economy in which the current recovery, led by Asia, might not be long lasting.

In September 2008, US investment bank Lehman Brothers went bust, triggering the global financial crisis and economic recession in the US, Europe, Japan and most of Asia, except China and India.

The worst US recession since the 1930s, the post-Lehman Brothers period has witnessed a huge demand collapse across the word and a crash in real-estate prices in Dubai, the business Mecca of the oil-exporting Middle East.

By seeking to postpone its debt repayment by six months, Dubai World alarmed the whole world of financial vulnerabilities.

Dubai's rulers earlier sought to borrow more funds from Abu Dhabi, another member state of the United Arab Emirates to cover its position, but the bid was apparently unsuccessful, resulting in the default.

Stock markets yesterday fell dramatically, while the US dollar rebounded against other currencies from its previous lows as investors fled to US treasuries as a safe haven.

Earlier, the greenback was under increased pressure to depreciate due to massive US debts and other weaknesses of the US economy in the wake of the Lehman Brothers crisis.

In addition, European financial institutions have also been hit hard by the Dubai World default owing to their huge credit exposure to the state-owned investment giant.

For instance, HSBC, Royal Bank of Scotland, Lloyds and ING, Deutsche Bank, Standard Chartered, Barclays Credit Suisse saw their shares spiralling.

In addition, shares of entities significantly owned by Dubai and other Middle East investors have dropped. These shares included the London Stock Exchange, Porsche and Daimler.

If the financial and economic conditions in the UAE, worsen, Thai exports would be the next casualties.

Thailand's shipments to the UAE, currently the largest market for Thai goods in the Middle East, accounting for 28.6 per cent of the total and include automobiles and parts, air-conditioners, gems and jewellery, steel, computers, textiles, plastic and chemicals, food and machinery.

In addition, several listed Thai companies in property, construction and other sectors could be hit by the Dubai World debacle.

For instance, Raimon Land is 15-per-cent owned by a unit of Dubai World, which also has equity ownership in Bumrungrad Hospital and other Thai firms.

In the construction sector, Italian Thai Development and Nawarat Pattanakarn are among the major Thai contractors in Dubai.