Global stock markets fell the day after one of Dubai’s state-owned holding firms shocked the financial world with a debt default request.

Dubai World, saddled with a $59 billion (Rs 2,74,350 crore) debt, on Wednesday asked creditors to defer payments for six months. Its subsidiaries include Nakheel, the construction firm famous for making country-shaped islands, and DP World, owners of five port terminals in India.

The Financial Times called it a “bombshell”. London and Frankfurt stocks fell 1.86 and 1.80 per cent, in the Asian markets’ footsteps. European banks hold $40 billion (Rs 1,86,000 crore) worth of Dubai World debt.

Credit rating agency Standard & Poor’s said Dubai World’s announced plans to restructure its debt “may be considered a default”. The default and tighter Chinese lending contributed to the fall. “But Dubai is bigger,” said David Morrison of financial risk firm GFT.

Dubai World’s woes raised concerns about the economic state of Dubai, the Persian Gulf’s financial and trading centre. Dubai would take a decade to recover from the loss of investor confidence, said analysts.

Dubai World lost heavily when real estate prices crashed last year, Indian officials based in the Gulf told HT. They also said the default spells trouble for wealthy Indians who have invested in Dubai real estate.

The rot in Dubai’s finances poses long-term problems for India’s economic recovery. Dubai has one of the largest Indian expatriate worker populations (1 million) in the Gulf. The UAE became India’s number one export destination in 2008-9, buying $24 billion worth of ‘made in India’ products. It sends home $ 2 billion (Rs 9,300 crore) in annual remittances.