The UAE team claimed the former England international was close to signing for them on Tuesday afternoon, but they have now announced they could not reach an agreement
Owen is available for free this summer after it was revealed he would not be offered the chance to stay at Manchester United for a fourth season, with his contract due to expire inside the next week.
After strong links with Stoke City, Al-Shabab claimed on their official Twitter account that they were close to coming to an agreement with the England international, but the club have since backtracked.
Saeed Al Marri, the club’s executive director, told UAE press: "The physical demands of Michael Owen does not correspond with the club."
Owen joined United in 2009 following four good seasons at Newcastle, but in each of his three years he has appeared in progressively fewer matches, making 31 appearances in his first term, 17 in his second and just four in the past season.
Injuries have been a frequent problem for the former Liverpool man ever since his spell at Real Madrid, restricting his involvement considerably, particularly at Old Trafford.
The forward is still believed to be adamant that he is able to play at the top level for a few more years yet, and had been linked with a number of lower Premier League clubs since leaving Sir Alex Ferguson's side.