The United Arab Emirates decided to suspend all its financial and economic transactions with Iran until further notice, justifying this with a military escalation by Tehran accompanied by missile threats. A decision that once again shed light on the tense relations between this major oil-producing Gulf state and the Islamic Republic of Iran, even though Tehran officially denied responsibility for the incident.
The UAE, a close ally of the United States and Israel and a rising regional power, was one of the Gulf countries most affected by Iranian attacks in the region. However, the last Iranian attack on UAE territory dates back to May 4, and targeted the port of Fujairah, a major oil export center.
An Emirati statement said, "The assessments that were made showed that the two ballistic missiles that were detected were launched from Iran and were targeting maritime traffic," adding that they fell into the sea. The UAE also sent an alert on mobile phones (Tuesday, August 18, 2026) stating that “the situation is safe” and people can resume their normal activities after a previous warning. The Iranian Ministry of Foreign Affairs rejected the UAE’s statement, describing it as “baseless.”
Afraa Al Hameli, Director of the Strategic Communications Department at the UAE Ministry of Foreign Affairs, said that her country “reaffirms its firm commitment to dialogue, cooperation and regional integration, as they are essential means for promoting peace, stability and prosperity in the region.”
A number of observers are raising questions about the repercussions of the UAE decision, especially since Dubai represents an indispensable outlet for Tehran’s financial and commercial transactions. A high-ranking European diplomat in the region, speaking to the German-language Swiss newspaper Neue Züricher Zeitung, described Dubai as “the bank of Iran.” Sources at another European embassy also confirmed to the same newspaper that "Iranian wealth estimated at billions of dollars is in bank accounts inside the Emirates."
Content and context of the UAE decision
Over the past decades, the United Arab Emirates has been a stronghold for a large Iranian community, and one of Tehran's most important trading partners despite the strict economic sanctions imposed on the Islamic Republic. After the outbreak of war and its lands being exposed to Iranian attacks, the UAE took a number of cautious measures, including summoning Tehran's ambassador and closing schools believed to be subject to Iranian influence. Therefore, the decision to stop financial and commercial transactions is considered the latest and strongest Emirati measure against Tehran. It falls within a general American context that seeks to tighten the economic and financial noose on Tehran.
The Financial Crimes Enforcement Network of the US Department of the Treasury has warned banks that Iranian networks are setting up shell companies in third countries, often using for this offer free trade zones that provide favorable conditions. Iranian actors are believed to often use general trading companies in the UAE's commercial free zones, as well as companies in Hong Kong that bank through accounts in China. According to the report, Iran's trading partners are mainly located in Singapore and Hong Kong. For his part, Anwar Gargash, the diplomatic advisor to the President of the UAE, wrote in a post on X that “the rumors that are being spread, such as those related to canceling workers’ residency permits or providing financial facilities to Iran, etc.... are incorrect information and are part of desperate media campaigns.”
“Blackmail” by Tehran and “response” by Abu Dhabi
Although Iran has stopped attacking UAE territory since May 4, oil tankers belonging to the UAE government company ADNOC have been subjected to several attacks over the past weeks. On August 8, the UAE Foreign Ministry announced that a missile hit an ADNOC tanker while it was crossing the Strait of Hormuz. On the 14th of the same month, the Ministry reported that two other ships belonging to the same company were targeted while crossing the strait. No injuries were recorded in the two accidents. While Abu Dhabi described the attacks as a flagrant violation of a UN Security Council resolution on freedom of maritime navigation, it said that “attacks on commercial ships and the use of the Strait of Hormuz as a tool for economic coercion or blackmail represent acts of piracy committed by the Iranian Revolutionary Guard.” Iran has closed the Strait of Hormuz, which is used by ships leaving most UAE ports.
In this regard, the OER website affiliated with the Austrian Broadcasting Network wrote (August 19) that “the trade embargo imposed by the United Arab Emirates will cause severe damage to Iran. Before the war, the UAE was Tehran’s second most important trading partner after China. According to Iranian data, Abu Dhabi exported goods to Iran in 2024 worth about 22 billion US dollars (..) but what is more important for Iran is Dubai’s financial position (..) and it is likely to direct a halt.” Trade is a severe blow to the Iranian economy, which is already suffering from its deepest crisis in decades. The inflation rate in food prices recently exceeded 130% compared to the same period of the previous year, and the International Monetary Fund (IWF) had expected that the inflation rate in Iran this year would reach approximately 70%, in addition to an economic contraction of 5.4%, and the Iranian currency, the riyal, recorded its lowest level ever, according to what the Austrian website reported.
US economic pressure 'most crushing ever'
Donald Trump threatened (Wednesday, August 20) to impose dire economic consequences on any country that helps Iran or deals with it in trade, in a move that reflects an escalation of the economic pressure exerted by Washington on Tehran. The American President wrote on his Truth Social platform, “I announce today that any country that allows its financial institutions, companies, airports, and governmental bodies to provide any form of lifeline to Iran will face dire economic consequences (..) Iran did not know how to seize the great opportunity to conclude an agreement (..) Therefore, I announce the most crushing economic operation ever taken against any country!”, referring to “an unprecedented economic war.” He continued, directing his words to countries suspected of helping Iran, without naming them: “Oil smuggling, currency exchange, cash transfers, exchange offices, ship registries, fake companies... All of this must stop now.” US Treasury Secretary Scott Besent, in turn, previously described Iran as economically isolated, "the likes of which the world has never seen."
"Hormuz won't open!"
Tehran's response came from the Chief of the General Staff of the Iranian Armed Forces, Major General Ali Abdullah, who in turn threatened to say that "any assistance or facilitation to the aggressor American army is considered participation with the American military forces" in their operations against the Islamic Republic. Muhammad Baqir Qalibaf, Speaker of the Shura Council and Iran’s chief negotiator, had stressed that “the Strait of Hormuz will not be opened unless the American obligations stipulated in the memorandum of understanding are implemented,” repeating the lifting of the blockade on its ports, the abolition of oil sanctions, and the release of frozen Iranian assets abroad. It is not clear whether the UAE coordinated the trade embargo with the United States, as the announcement is consistent in timing and context with American threats against the Islamic Republic.
