UAE halts trade with Iran over alleged missile attack

The United Arab Emirates announced on Wednesday that it is suspending all trade, commercial exchanges, and financial transactions with Iran "until further notice," citing regional escalations that "undermine regional and international peace and security." The decision came after the UAE Defense Ministry said it had detected the launch of two ballistic missiles from Iran, which it said targeted maritime navigation. One missile fell outside the country's territorial waters and another within, according to the ministry.

The UAE Foreign Ministry said in a statement that while it remains committed to "dialogue, cooperation, and regional integration," it had decided to impose the punitive measures. The ministry's announcement was reported by multiple news outlets, including TASS and the Associated Press.

Iran's Foreign Ministry spokesperson, Esmail Baghaei, denied that Iran had launched any missiles toward the UAE, calling the claim harmful to regional trust and security efforts, as reported by the Associated Press and the Free Press Journal.

Economic impact of the suspension

The suspension is significant given the close economic ties between the two countries. Before the war, the UAE was one of Iran's largest trading partners, providing more than 30% of Iran's imports—valued at about $21 billion—and serving as the destination for nearly 13% of Iran's exports, worth about $7 billion, according to World Trade Organization figures from 2024 as cited by the Associated Press and the Free Press Journal.

Mohammad Farzanegan, a professor of Middle Eastern economics at the University of Marburg in Germany, told the Associated Press that the UAE has been a crucial re-export hub for Iran, helping it absorb some of the shocks caused by sanctions. However, he warned that the embargo could also cause "substantial damage" to the UAE economy, which depends heavily on regional stability.

Abdulkhaleq Abdulla, an expert in UAE foreign policy and Gulf-Iran relations, told Africa News that the move would deepen the hardship of ordinary Iranians. "First and the foremost what comes to mind ... is the impact on 90 million Iranians who are in [a] very difficult situation already and this is going to make their life even more miserable," he said. He noted that trade between the two countries is around $20–25 billion, which is only about 3% of the UAE's total foreign trade.

Broader context of the conflict

The UAE has regularly come under fire from Iran early in the conflict, which began on February 28 when the US and Israel launched the war, according to multiple reports. Iran has launched hundreds of ballistic missiles and thousands of drones during the conflict, targeting US assets but also hitting buildings in Dubai and Abu Dhabi, Dubai's commercial airport, ports, and energy infrastructure, as reported by the Free Press Journal and the Associated Press.

Iran had accused the UAE and other US allies in the Gulf of facilitating American military attacks on Iran. Iran's Chief of Staff, Gen. Ali Abdollahi, warned "countries on the southern shores of the Persian Gulf" that any assistance to the US military would be considered participation alongside US forces.

The Strait of Hormuz, through which a fifth of traded oil and natural gas passes during peacetime, has seen regular attacks on ships. Nearly 20 ADNOC vessels have been attacked by missiles and drones since the conflict began, killing one person and wounding 20, according to the Associated Press and the Free Press Journal. Four tankers owned by ADNOC have been attacked in the past two weeks alone, with no injuries.

Iran's economic struggles and US measures

The suspension comes as Iran already faces severe economic pressure. The International Monetary Fund forecasts inflation of nearly 70% this year and an economic contraction of 5.4%, with the Iranian rial falling to record lows, as reported by the Free Press Journal and the Associated Press.

US Treasury Secretary Scott Bessent said the US would implement new measures to impose economic pressure on Iran through economic isolation and the blockade of Iranian ports, according to the Free Press Journal. President Trump called the effort "economic D-day" and announced a trade route, as reported by the New York Post.

UAE denies providing financial facilities

Hours after the suspension announcement, the UAE denied reports that it had been providing financial facilities to Iran. Presidential diplomatic adviser Anwar Gargash rejected the claims as false, describing them as part of "desperate media campaigns," as reported by Middle East Monitor. Gargash stressed that the UAE "continues to focus its efforts on dealing with developments in the region and preparing for what comes after this phase."

Background on Iran-US negotiations

A memorandum of understanding was signed between Washington and Tehran on June 18, but negotiations later stalled over disagreements concerning guarantees for security and freedom of navigation in the Strait of Hormuz, according to Middle East Monitor. Iran recently resumed talks with Oman on establishing safe passage routes for ships through the strait.

On July 12, Iran launched intensive missile and drone attacks targeting several Gulf countries following heavy US airstrikes on targets inside Iran, as reported by Middle East Monitor. The US carried out attacks on Iran between July 8 and 24, and Iran responded by targeting US military facilities in Arab countries.

Regional reactions

The UAE, along with Kuwait and Bahrain, has condemned Iran for attacking ships in the Strait of Hormuz, according to the Associated Press. The suspension of trade is seen as a further step in isolating Iran economically, but it also carries risks for the UAE, which depends on regional stability for its role as a business and finance hub.