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.