Country that produces surprisingly little Muscat wine

OMAN

This Arabian Peninsula nation is better known for dates and oil than its vineyards.

This clue plays on the expectation that Muscat wine comes from Oman, since "Muscat" is its capital. But the word "surprisingly" hints at a twist—Oman actually produces very little of the wine named after its city. The answer is a misdirection, using the capital's name to lead you to the country itself.