Climate change stressors like rising and warmer seas, increased storms and droughts, and acidifying oceans are rapidly threatening coastal zones, which are the world’s most densely inhabited places. This research assesses the effects of Palm Jumeirah Island (PJI) construction on its surrounding water quality and temperature, using Landsat-7 and 8 spectral and thermal bands for the years 2001, 2014, 2016, 2019, and 2020. To aid in this goal, the changes in water spectral reflectance was observed and interpreted, based on previous research and measurements, to discover the correlation between water quality and its spectral reflectance. Then, the sea surface temperature (SST) was calculated for the years under review and changes in water temperature were evaluated. Finally, the Green Normalized Difference Vegetation Index (GNDVI) and the Normalized Difference Turbidity Index (NDTI) were calculated to estimate water chlorophyll levels and water turbidity, respectively, and changes were observed and interpreted for the time period under review. The present study showed that the PJI construction not only increased the water reflectance in the 0.5–0.8 µm of wavelength, which can be considered to be the increase of suspended sediments and chlorophyll but the water temperature also increased by 7.5 °C during the 19 years. In addition, a gradual increase in the values of GNDVI (by 0.097–0.129) and NDTI (by 0.118~0.172) were observed. A drop in chlorophyll and suspended sediment spectral reflectance and GNDVI and NDTI values were also observed in 2020 compared to 2019 which can be attributed to the 63 to 82% decrease in tourists in Dubai in 2020 as a result of the COVID-19 pandemic. This study aims to draw attention to environmental issues by clarifying the effect of creating artificial islands in the sea and our analysis and results are a suitable reference for specialized hydrological and environmental studies based on spectral information and distance measurements, as presented in this paper.