The city that gave the world Sinbad the Sailor feels like a fairytale and smells fabulously of frankincense. Muscat, the capital of Oman, is perched on the horn of the Persian Gulf, surrounded by a 2000-kilometre coastline. Muscat's history dates back 5000 years, which gives the city a timeless feel, though in recent years it has been cantering at a steady pace into the 21st century.

Muscat is just 400km and a comfortable 45-minute flight from the skyscraper city of Dubai, although it could not be a more different neighbour.

It was a proud runner-up for the "cleanest city in the world" title and this enchanting capital, with a population of 600,000, is normally quiet, peaceful and green, as though the tidy fairy waves her wand over the pristine houses each morning sprucing them up for yet another day.

The battering and loss of life caused by the 176kmh winds of cyclone Gonu last month were a terrible shock to a country proud of its reputation for safe travel. But Oman, which has a population of 3.2 million, is recovering quickly. It seems little structural damage was done and with these next few months being low season (it's even too hot for the locals) by September, when tourists return, business should be almost back to normal.

Muscat is ideally located on a narrow coastal strip with the clear waters of the Gulf of Oman on one side, dramatic mountains on the other. A drive along the corniche evokes the Riviera but the architecture, with its clean, square lines, is pure Arabian, an example being the studded doors. No new building can be higher than six storeys, dirty cars incur a fine and home owners have to comply with certain house paint colours in specific areas.

Shady date palms under-planted with manicured hedges or colourful lower beds trim city streets as they meander around magnificent roundabouts. Street directions and locations are often given with a specific roundabout reference. Notable among these are the Al Bustan roundabout with its replica of the dhow reputedly used by Sinbad on his journey across the seven seas, a giant brightly coloured traditional frankincense burner, an over-sized Omani-style coffee pot and another depicting three golden jars spilling over with water.

Visitors throng to central Mutrah Souq where, as in decades past, burning incense wafts through narrow alleyways, antique silver amulets and necklaces cram narrow shops, bolts of glittering fabrics and braids from India are on display and finely decorated khanjars, or daggers, ceremonially worn by men in their belts line shop walls. This dagger is also the national symbol.

Market folk would rather chat than hassle for sales. There is an almost lethargic feeling of: if you want to buy it, you will.

Men wear delicately embroidered caps called kumas and gather in cafes, often sipping on strong Omani coffee flavoured with cardamom, saffron or cinnamon. Their dishdasha, or long shirt-dress, is different to others in the Middle East. It's trimmed with an elegant neck tassel, which they spray with perfume. In this land of frankincense and myrrh, Omani men love perfume and will have three or four at the ready.

Frankincense was once considered more precious than gold and is produced from the aromatic resin of the Boswellia tree that grows in neighbouring Yemen but excels in the harsher monsoon-lashed mountains of Dhofar province in the south. So prized was this Dhofari incense, it is said that the Queen of Sheba hand delivered some to King Solomon herself and, of course, it was among the legendary biblical gifts of the Three Wise Men, along with gold and myrrh - another locally produced incense.

Frankincense is the must-buy souvenir from Oman; you can smell its gentle perfume everywhere. It is burned daily in homes to rid them of cooking smells and is used in locally produced perfumes. In fact, Oman is the home of Amouage, marketed as "the most valuable perfume" in the world - "we don't take into consideration the expense" - whose blends of scents include those biblical ingredients along with flowers, fruits, spices and petals from rock roses that grow wild in a hidden valley in the mountainous Jebel Akhdar near Nizwa.

This is a Muslim country where the majority of Omanis. Go early to the Grand Mosque whose imposing frame houses massive European crystal chandeliers, one of the largest carpets in the world and can accommodate up to 20,000 people. The women's prayer room pales into insignificance somewhat after the men-only main prayer area. Sultan Qaboos built it at his own expense to mark his 30th anniversary in power.

Oman is considered by the United Nations to be the Gulf's safest country. It is listed number 22 on the 2007 Global Peace Index - the highest of all Gulf countries and three positions higher than Australia.

Once occupying a much larger area with outposts in Zanzibar and Mombasa, today it is bordered by the United Arab Emirates and Saudi Arabia to the west and Yemen to the south, with enviable coastlines that edge the Gulf of Oman to the north and the Arabian Sea to the south-east. Its clear waters produce excellent sardines and lobster.

Its strategic location on the southern entrance to the Gulf has only ever been seriously eyed by the Portuguese, who invaded in 1507 and took over the coastal stretches for some 150 years. Their defensive forts became the blueprint for Omani forts that today dot the desert and mountainous countryside. The Portuguese-built forts of Jalali, Mirani and Mutrah remain prominent on Muscat's landscape today.

Following internal bickering, the division of the country into north and south sultanates and the reluctance of the then Sultan Said bin Taimur to invest oil revenues in infrastructure, his son Qaboos bin Said led a bloodless coup in 1970 and started a modernisation program as soon as he was ensconced in the palace. The English-educated Sultan Qaboos, has provided free education up to tertiary level and medical care, delivered electricity to outlying villages, offers land to his subjects on their 24th birthday and has instigated an "Omanisation" policy to employ and train Omani staff in all facets of business, from car washes to hotel managers. The Sultan is not warfaring by nature, despite the cross swords and traditional khanjar on the national flag. Stories of his generosity abound, such as marking his 25th anniversary in office by presenting his 24 government ministers with brand new Audis.

While the rest of the Gulf is billiard table flat, Oman has a varied landscape with majestic rocky mountains that buffer the northern coastal plains, a huge golden sandy desert that stretches south from the Western Hajar mountains to the Arabian Sea and lush palm-filled wadis, or dry creek beds, that become flowing torrents after rain. In the dry season, these wadis are virtual oases where children love to swim.

Most visitors stay for a few days and visit the north-eastern corner around Muscat, Nizwa and Sur, or stay for eight days or more and see the whole country down to Salalah in the province of Dhofar.

However, with limited time, we cover good ground in the north via Qurayat, lunching on the snow-white beach at Bamah before venturing up Wadi Shab, considered one of the most gorgeous destinations in Oman. However, with the summer temperatures in the high 30s, we decide not to trek very far into the gorge but hear from other walkers emerging from the shaded path about water holes, abundant birdlife and a rewarding cave at the end of the path.

Our route is along the half-sealed new highway, a joint venture between the sultanate and India and China, with imported labour from both those countries working on it in exchange for gas. In the fishing village of Tiwi, we spy a date-picker in a makeshift safety harness up a laden palm tree. We stop and beckon him to throw a few down. My driver and guide, Ali, catches them in his dishdasha, held up like a kitchen apron, and we savour them as we head for Sur. Dates feature strongly in Omani cuisine in dishes such as halwa - the national treat made from slow-boiling dates with rosewater, cardamom, saffron, nutmeg and almonds to create a gooey sweet that is served off a spoon with strong Omani coffee.

Sur is primarily a fishing village and spreads around a lagoon where 20 or more mosaic-topped minarets punctuate the low skyline. Famous throughout the Gulf region for its unique hand-crafted dhows, it has the only remaining ship-building yards of their kind in the world. Where once there were five ship-building enterprises strung out alongside each other, today Juma Hassoon Al-Araimi is the sole survivor.

The easterly point of Ras al Jinz is one of the few nesting sites in the world for the giant green turtle. In the moonlight, we witness two large females struggling up the beach as they search for nesting spots. Each year, about 20,000 turtles come to lay eggs, which hatch after two months. The site ranger releases a hatchling gently into the shallows in an effort to outsmart predators.

The heat haze next day almost blanks out the mountainous backdrop as the road carves its way through the arid countryside where wild camels and goats make light of the 40-degree day. We cross dry creek beds scattered with date palms and small sand-coloured villages that blend in with the harsh environment.

At Nizwa, the former capital of Oman, we tour the circular fort built in 1643 to defend the adjoining castle that dates back to 851. Invaders were deterred by seven barricaded doors; five with overhead shafts for a surprise dousing with boiling date syrup, and booby traps below. The town is also famous for its lively Thursday morning livestock market. Nearby is beautiful Jabrin Castle built in 1670 to protect the local henna plantations. More than 20 Omani forts are on the UNESCO World Heritage List.

Accommodation in the country is modest but clean and comfortable. With tourism increasing, several new up-market city hotels have opened in recent years. Foremost among these is the exclusive Chedi Muscat resort which has won numerous awards for its food, service and architecture including a Conde Nast Traveler Reader Award for two years in a row.

With the country's basic infrastructure now in place construction has begun on a new airport, reputedly to be the largest in the Middle East. It will open in 2010, ready to welcome up to 12 million visitors a year.