UAE halts trade with Iran after alleged missile attack

The United Arab Emirates has imposed an indefinite trade embargo on Iran, accusing Iranian forces of firing two ballistic missiles at its territory. The announcement, made early on Wednesday, came after the UAE's Ministry of Defence said its air defences detected two missiles launched from Iran, with one falling in the country's territorial waters and the other outside. In a follow-up statement, the ministry said the missiles had been "targeting maritime traffic" and promised to "resolutely confront any attempt to undermine the security of the nation or maritime navigation in the region."

The UAE's Ministry of Foreign Affairs said the decision was made in "light of escalations that undermine peace and security in the region," adding: "All trade, commercial exchanges and financial transactions with Iran have been halted until further notice." The ministry's Director of Strategic Communications, Afra Al Hameli, reiterated the country's "steadfast commitment to dialogue, co-operation and regional integration."

Iran swiftly denied the accusation. Foreign Ministry spokesman Esmaeil Baghaei rejected it as "baseless," suggesting it was a "false flag operation" by the United States and Israel. He warned the claim "contradicts the principle of good neighbourliness" and argued that any honest assessment must also weigh the "malicious actions" of Washington and Tel Aviv.

The strike is the first reported attack on the UAE since May, and comes days after Abu Dhabi accused Tehran of attacking two ADNOC vessels in the Strait of Hormuz, an allegation Iran denied.

A history of attacks and strained relations

The missile incident is the latest in a conflict that began with US and Israeli strikes on Tehran on February 28, which killed then-Supreme Leader Ayatollah Ali Khamenei. In the war's first six weeks, Iran targeted the UAE with retaliatory strikes more than any other Gulf country, launching more than 530 ballistic missiles, 26 cruise missiles and over 2,200 drones towards targets in the emirates.

According to Al Jazeera, those attacks killed 15 people in the UAE, including two military personnel, one civilian contractor and 12 other civilians, and injured 246. Key incidents included a strike on Dubai's Jebel Ali port on March 1, a fire at the Musaffah fuel terminal in southwest Abu Dhabi on March 2, and a partial halt to oil loading at the port of Fujairah after a drone attack on March 17. In May, a fire broke out near the Barakah Nuclear Energy Plant following a drone strike.

The UAE suspended direct cargo shipping with Iran in early March and resumed in late June via Jebel Ali Port. In July, an explosion at the port caused a fire after the US resumed strikes on Iran.

Economic impact and the embargo's significance

Analysts say the embargo could be more damaging to Iran than the US naval blockade and sanctions. Mark Kimmitt, a retired US general and former assistant secretary of state, told Al Jazeera: "In many ways, the embargo being put on by the UAE is even more significant than the embargo being put on by the United States." He added: "I don't think that you can overstate or understate the importance of the trade, both financial and goods trade, between Dubai and Iran."

Dubai has become Iran's most important trading partner, surpassing China and Turkiye, supplying roughly one-third of Iran's annual imports and acting as a financial hub for evading sanctions. Official goods trade between the UAE and Iran amounted to $6.2 billion in 2023, with UAE exports of $5.8 billion and imports of $450 million, according to the Observatory of Economic Complexity. In 2023, Iran imported telephones worth $2.81 billion from the UAE. Before the war, bilateral trade totalled $28 billion in 2024, according to the World Trade Organization, with the UAE supplying goods worth $21 billion.

Mohammad Farzanegan, a professor at the University of Marburg, said the UAE is a critical economic partner for Iran and serves as a re-export hub. He warned that the embargo carries a risk of renewed confrontation with Tehran.

Kimmitt noted that the UAE's move could be interpreted by Tehran as "bordering on an act of war," likening it to the US embargo on Japan after World War II. "The UAE is a gateway for Iran to third countries," he said.

The embargo comes as the US maintains a naval blockade on Iranian ports, with President Donald Trump signalling a pivot towards economic pressure. US Treasury Secretary Scott Bessent said the administration plans to intensify economic pressure with measures that have "never been seen in the history of economic isolation on a country."

Wider regional tensions and Hormuz shipping

The standoff has also heightened tensions across the Gulf. Iranian military chief of staff Ali Abdollahi warned regional countries that "any assistance to the U.S. military is equivalent to operating alongside U.S. military forces." The warning came as Iran's Revolutionary Guards reportedly seized an oil tanker named Amara in the Strait of Hormuz, saying it was "linked to the United Arab Emirates."

Shipping through the Strait of Hormuz remains well below normal. Reuters reported that only six commodity vessels crossed the strait on Tuesday, compared with nine the previous day and a recent daily average of 11. Before the conflict, the waterway carried roughly one-fifth of global oil and LNG supplies. Two major Chinese shipping companies have stopped using both the Strait of Hormuz and the Bab al-Mandab route since late July.

Energy prices remain elevated amid the disruptions. Brent crude was around $91 a barrel on Wednesday, while West Texas Intermediate traded around $85, according to Livemint. The American Conservative reported Brent crude over $92 per barrel on Wednesday morning, with AAA recording a national average gas price of $4.09 per gallon.

Trump, meanwhile, said on Wednesday that there are no talks or conversations going on, or scheduled, with Iran, writing on Truth Social: "The Naval Blockade remains in full force and effect. The Hormuz Strait is open and operating. All water mines have been removed or detonated." The statement contradicted earlier comments by his envoy Jared Kushner, who had said talks were going "better than ever." A CNN report indicated Trump ordered senior envoys to halt discussions, with a source familiar with the details saying White House officials informed allies of a "change in strategy."

In separate developments, Iranian Parliament Speaker and chief negotiator Mohammad Bagher Ghalibaf travelled to Iraq, calling for a "new order" in the region. Israeli strikes killed at least 10 Palestinians in Gaza on Wednesday, as US efforts to advance a ceasefire remained stalled.