London investors are still wary after last week's request by Dubai World for a six-month standstill on debt repayments raised concerns about possible default.
Fears have risen the weekend as the central bank of the United Arab Emirates (UAE) set up a liquidity facility to help shore up its financial system.
The FTSE fell 22 points, or 0.4%, to 5,224.26 shortly after markets opened, but has since started to climb.
Despite gains across Asian equity markets, fears Dubai could be forced to sell some UK assets hit shares in those companies seen as most exposed.
Standard Chartered, in which Dubai World affiliate Istithmar has a 2.7% stake, fell 0.3 per cent to £15.16, while the London Stock Exchange, which is 21% owned by Borse Dubai, lost 1.6% to 763.4p.
In the UAE, the main Abu Dhabi index plunged over 8% as shares in the National Bank of Abu Dhabi fell about 10%. Dubai World was off 15% on the Dubai exchange.
The falls came after Dubai's property developer, Nakheel, asked for trading of some of its Islamic bonds to be suspended.
On Wall Street, the Dow Jones closed up 0.3% at 10,350.
Tokyo's Nikkei 225 index rose 2.9%, while Hong Kong's Hang Seng gained 3.6% and stocks in Shanghai rose 2.5%.
Crude oil rose by 1% to more than $76 a barrel, after the benchmark commodity slid last week on fears over Dubai's financial health.
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