Dubai debt crisis Another Financial Crisis, Dubai Debt Crisis Report

Dubai's debt crisis rattled world financial markets Friday, raising concerns that some banks could further tighten lending and hamper the global economic recovery.

The possible spillover effects from Dubai fed fears that international banks could suffer big losses if the debt-laden emirate is forced to default. That sent stock and commodity markets tumbling in New York, London and Asia as investors flocked to the U.S. dollar as a safe haven.

But earlier concerns that the crisis might trigger another major financial meltdown seemed to ease Friday after some analysts downplayed the risks for U.S. banks. U.S. stocks rebounded from their earlier lows as investors grew confident that the damage might be contained.

"I don't think the collateral damage is going to be that great," said Jeffrey Saut, chief investment strategist at Raymond James. "People will dig into this over the weekend, but I think balance sheets have healed enough to withstand a shock like this."

Still, the unfolding crisis in Dubai pointed to the vulnerability of the global economy despite recent signs of recovery.

A year after the global slump derailed Dubai's explosive growth, the city-state's main investment arm, Dubai World, revealed this week it was asking for at least a six-month delay on paying back its $60 billion debt. Major credit agencies responded by slashing debt ratings on Dubai's state companies, saying they might consider the plan a default.

In recent years, Dubai has expanded with ambitious, eye-catching projects like the Gulf's palm-shaped islands and the world's tallest skyscraper in hopes of becoming a tourist friendly and cosmopolitan Middle Eastern metropolis.

In the process, however, the state-backed networks nicknamed Dubai Inc. have racked up $80 billion in red ink, and the emirate may now need another bailout from its oil-rich neighbor Abu Dhabi, the capital of the United Arab Emirates.

News@Yahoo