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Unknowingly, I arrive in Muscat just after National Day, November 18th. It is dark, or supposed to be, but it feels like I have landed in fairyland. The place is ablaze with lights: red, green and white, the colours of the Omani flag. Garlands of lightbulbs in their millions festoon the four-lane highways and car-parks, cascade down five-star hotels, are strung up the masts of fishing-boats and even, the best one, outline the silhouette of a road-digger. Flags, too, alternate with portraits of the sweetly smiling, Sandhurst-trained Sultan Qaboos, now 66, attached to street-lights along the main coastal highway. As our Landcruiser bowls along this smooth, perfectly signposted road dotted with speed cameras, my young guide, Jaifar, laughs excitedly and says what a brilliant man the Sultan is. During conversations with dozens of Omanis over the next week, this opinion never differs. There is no doubt about it; they love their ruler.

Oman is a country on the cusp, teetering between following the Emirates route of glitzy ersatz and sticking to its infinitely more subtle approach that balances deep traditions with a passion for mobile phones. Having heard so little about this discreet Sultanate, I think of spices, heavy perfume, dhows and Sinbad the Sailor. So the utter modernity of its capital, Muscat, comes as a complete shock. In 35 years Oman has shot from a tribal society with 10 miles of paved road straight into the 21st century with an infrastructure to match. When I finally see Muscat’s uber-luxury hotels (all full), I wonder how tourism fits into this oil-rich country with one of the highest per capita incomes in the word. They certainly have no economic need for foreigners draping themselves round pools or haggling for frankincense in the souks. Yet, all too aware of the dangers of oil-dependence, Oman seems to be angling for a kind of luxe, calme et volupté niche on the tourist-map of the Gulf.

Muscat is in fact a necklace of former coastal villages, now suburbs that have fused into one with Old Muscat at their heart. It starts by the airport at lively Seeb, where bougainvillea hedges and flower-beds announce one of Sultan Qaboos’ many palaces. In the working-class quarter nearby, lamb-kebabs sizzle on seafront grills and a Tanzanian band belts out African rock in the one nightclub (alcohol-free Saudi Arabia may be next door but in Oman drink flows like oil – in specific places). From Seeb, also the site of The Wave, a massive waterfront development yet to be built, it takes about 50 minutes to drive past the low-rise urban sprawl to a dramatic, mountain-backed bay monopolised by the Shangri-La complex, for the moment the southernmost tourist development of Muscat. In between all is immaculate, clean and green.

High above, the silhouettes of watchtowers spell out long centuries of inter-tribal warfare between the sheikhdoms of the interior parallel to the profitable trading and brilliant seamanship of Muscat. Back in the 10th century, the dhows reached China and the lucrative spice and slave trade with Africa and India created an Omani empire from Zanzibar to Baluchistan, now part of Pakistan. Muttrah, right next to Old Muscat, reflects this most. Wooden dhows bob in the harbour in front of some rare older houses, there is a massive fort, a fish market and Oman’s oldest souk where khanjar (viciously curved daggers with stunning silver and gold filigreework) are the stars of the show, followed by old silver coins, heavy silver Bedouin jewellery, frankincense and cheap pashmina scarves flogged by wily Indian shopkeepers. I soon gather that, as usual, it is Indians who are the mainstay of Omani’s small businesses and coffee-shops (where you can eat a respectable chicken biryani lunch for £2 – a steal in an otherwise pricey country) as well as being the majority work-force.

The industrious Indians fade beside statuesque Omani men in spotless white dishdashas and embroidered caps or small turbans who stroll, chat in coffee-shops or sit cross-legged on mats playing dominoes. In contrast the women are mainly in black niqab but they too have individualistic touches, whether embroidered and beaded details or Sophia Loren-style eyeliner. Like chattering birds they saunter along Muttrah’s new waterfront promenade catching the night breeze or, more acquisitively, snap up extra bracelets in the gold souk. There is nothing demure about them and this is confirmed when I am told that, again thanks to the Sultan’s policies, many work in big business and politics.

Altogether Muscat feels like a model city in a soft Islam created with patience, money and intelligence. The Grand Mosque, inaugurated in 2001, rather than being a self-aggrandizing symbol of Oman-ness, turns out to be a serene, grandiose structure of white stone and marble where cool arcades and courtyards display Islamic decorative styles from Egyptian Mamluk to Indian Mughal. Things take off more ostentaciously inside the gigantic prayer-hall where chandeliers drip Swarovski crystal and the world’s largest carpet, from Khurasan in Iran, cushions the knees of 6,000 male worshippers. Predictably, the women’s room is a much smaller, simpler affair where the Imam is watched on CCTV.

No country can be judged by its capital alone so Jaifar whisks me off on a whistle-stop tour of the verdant towns of Nakhal and Rustaq in the lee of Jabal Akhdar, part of the formidably barren Hajar mountain range. Like most of Oman’s oases, Nakhal’s offerings are limited to a perfectly restored fort, this one with sparingly reconstructed interiors. Outside, old mud-and-stone houses crumble gently beside hot springs and a network of falaj (irrigation channels) which feed lush gardens of banana and date palms, papaya and mango trees. Then, between “Men tailoring”, “Hair trimming” and “Food stuff” shops, we stop at a small halwa factory where one of Jaifar’s many friends hails him from the doorway. With a population of only 2.8 million, your social network can go a long way but it is helped by one of this country’s greatest assets: the extreme affability and courteousness of its inhabitants. After a quick tasting of the buttery sweet jelly with its curious burnt flavour chased by a thimble-shot of bitter Omani coffee, we are hurtling along the road again, this time over the mountains to Nizwa, the old capital.

The mountain road is spectacular, twisting through wadis and canyons where only acacia trees dare to grow and overlooked by jagged limestone peaks that include Jabal Shams (“sun mountain”), at nearly 10,000 ft one of the highest in Arabia. At last, down the other side, comes the legendary crossroad town of Nizwa, described by Jan Morris as having once been “the Hastings, the Westminster and the Canterbury of Oman”. No longer the case, Nizwa now feels a bit of a tourist-trap, from its custom-made tourist souk to the massive, heavily restored circular fort. But it all changes early the next morning with the Friday cattle auction. It is pure, exotic theatre, a cross between a Pamplona bull-running and the re-enactment of a Biblical parable, despite Nizwa being a centre of Ibadhism, Oman’s tolerant branch of Islam.

Old and young, all in long white robes and turbans or embroidered kummah, watch transfixed as goats, calves, cows and young bulls are dragged kicking and bucking around a circular path through the crowds of onlookers. There is heat and dust and the shadows of palm-trees, bleating of kid-goats and strident bidding. In the background, Bedouin women in frightening, beak-like masks sell goats while a black Omani, undoubtedly descended from African slaves, collects bids for his beautiful horse. A couple of hours later, the Toyota pick-up trucks bounce off with the weeks’ acquisitions, happy Bedouins packed inside, and the spectators drift away. I am left standing there, wondering what century I am really in.

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