The UAE Ministry of Foreign Affairs announced on Tuesday that, in response to the continued escalation of the regional situation, it would suspend all trade, commercial and financial transactions with Iran from that day until further notice. The authorities said that despite taking these measures, the UAE still hopes to promote peace and stability in the Middle East through dialogue and cooperation.

The UAE has long been an important trade and financial gateway for Iran, with Dubai in particular serving as a major centre for Iranian imports, re-export trade and financial settlements. According to World Trade Organization data, Iran imported approximately US$21 billion worth of goods from the UAE in 2024, accounting for 30.6% of its total imports that year.

Therefore, if the ban continues, Iran’s import supply chains, foreign exchange settlements and corporate financing could all be affected, and it may also need to turn to other countries or informal channels for procurement, further increasing import costs and inflationary pressure.

The decision also comes as security tensions between the two countries escalate. The UAE previously accused Iran of attacking several vessels linked to the UAE’s national oil company, ADNOC, in the Strait of Hormuz. The UAE Ministry of Defence said on Tuesday that its air defence systems detected two ballistic missiles launched by Iran, one of which fell outside UAE territorial waters while the other entered its territorial waters.

Commentary:

The UAE’s full suspension of trade and financial ties with Iran is ostensibly a response to security threats, but the decision could also further worsen the regional situation.

More than 30% of Iran’s imports come from the UAE, while Dubai is also an important re-export and financial centre for Iran. If transactions are disrupted for a prolonged period, Iran will face not only diplomatic pressure, but simultaneous disruptions to its imports, financing and foreign exchange channels. This could ultimately push up the prices of goods, passing the costs of geopolitical tensions on to ordinary people.

Of course, governments need to protect national interests in the face of security threats. But if the measures ultimately make the regional economy even more unstable and raise the cost of living for ordinary people, the true cost of this geopolitical contest could be far more profound than the diplomatic conflict itself.

Taiwan’s government will propose record defence spending for 2027, President Lai Ching-te said on Monday, as the island democracy faces growing military pressure from China.

Taipei’s announcement comes as governments around the world boost defence spending in the face of intensifying conflicts, and growing concern about US commitment to the Asia-Pacific region. Beijing has been claiming Taiwan is part of its territory, and has threatened to use force to annex the island of 23 million people.

“Next year’s total defence budget — including both the annual budget and the special budget — will exceed NT$1 trillion for the first time, reaching NT$1.1225 trillion ($35.2 billion),” Lai said in a statement issued by the Presidential Office.

Taiwan has been boosting defence spending for years and acquiring smaller and more nimble weaponry, including drones, to enable its military to wage asymmetric warfare against China. Under intense US pressure to cough up more on security, Lai’s government has vowed to increase defence spending to five percent of GDP by 2030.

But Lai’s government has been at loggerheads with Taiwan’s opposition parties, which have a majority in parliament, over how much to spend on boosting the island’s defence capabilities.

Donald Trump’s envoy and son-in-law Jared Kushner has wrapped up two days of meetings with Israeli and Hamas leaders to break a stalemate over the US president’s Gaza plan, but there have been no signs of an imminent breakthrough as both sides dig in.

The US president last month announced that Hamas had agreed to lay down its arms in phases, under a 15-point road map put forward by his so-called Board of Peace to advance the president’s plan, as Israel’s military withdraws from Gaza.

Kushner met Israel Prime Minister Netanyahu in Israel a day after meeting Hamas’s political leader in Egypt in a bid to revive the plan, which has stalled as Israel has carried out air strikes and seized more territory in Gaza despite an October ceasefire, while Hamas has refused to give up its weapons.

An Israeli official indicated that there was no breakthrough in the meeting, saying Netanyahu had made it clear the military would not withdraw from a demarcation line set out in an October ceasefire and would continue to carry out operations in Gaza as it saw necessary, including targeting those who took part in the October 7, 2023, attack on Israel that triggered the war. They remarked that Netanyahu and Kushner agreed in the meeting that the reconstruction of Gaza would not begin until Hamas was fully disarmed, including of light weapons.