The Gulf standoff has ended with Abu Dhabi finally agreeing to rescue Dubai from its debt trap.

The richest of the Gulf emirates has provided $US10 billion to Dubai’s government – more than enough to repay the $US4.1 billion due on Monday to holders of a sukuk, or Islamic bond, issued by Nakheel, a property development arm of Dubai World.

The remainder of the funds will be used to finance Dubai World's needs up until the end of April 2010.

Dubai World’s investment arm, Istithmar, lost control of a flash Manhattan hotel and bonds in six state-controlled companies tumbled to record lows as the emirate's debt crisis continues.

The trendy W Hotel Union Square was one of Dubai World’s prize properties – other hotels in New York are the Knickerbocker and Mandarin Oriental, while another is the new W in Washington DC.

More than $US8 billion has been wiped from the value of Dubai’s sharemarket as the emirate’s debt woes worsen.

All of this year's gains have been lost as the Dubai Financial Market's benchmark index shed 6.1% to close at 1638.05 on Tuesday.

It has lost 22% since November 30, or $US8.4 billion, as uncertainty continued about Dubai World's repayment plans for $US26 billion of debt.

A senior finance official said on Monday that asset sales by Dubai World were not backed by the government, implying creditors could not depend on being bailed out.

United Arab Emirates sharemarkets hit by the Dubai debt crisis have rebounded as trading resumed on Sunday from the extended national day holiday.

Abu Dhabi shares gained the most since March and Dubai’s index rose for the first time in three days on investor speculation last week’s drop was overdone.

Stocks on Wall Street have joined a worldwide rally, buoyed by a spurt in Chinese manufacturing and moves to ease the impact of the Dubai debt crisis on the world financial system.

The Dow Jones Industrial Average rose to a 14-month high after China said its manufacturing grew at the fastest pace in five years and Dubai World said it’s in talks to restructure $US26 billion in debt – less than half its total borrowings.