The United Arab Emirates (UAE) has halted all financial and commercial transactions with Iran, according to a statement issued by the UAE Ministry of Foreign Affairs on Aug. 19. Experts say the move highlights the widening economic impact of the US-Iran war while pushing Tehran and other regional economies to seek alternative trade routes and multiple commercial hubs.
“In light of regional escalations that undermine regional and international peace and security, all trade, commercial exchanges, and financial transactions with Iran have been halted until further notice,” said Afra Al Hameli, Director of the Strategic Communications Department at the Ministry of Foreign Affairs (MoFA) in the official statement.
Mark Kimmitt, a retired U.S. general and former assistant secretary of state, told Al Jazeera that the UAE’s trade embargo against Iran comes as an even more serious development for Tehran than existing U.S. sanctions and the American naval blockade of Iranian ports.
Annual trade between Iran and the UAE stood at US$27 billion before the war, with 80 percent of that trade consisting of UAE exports to Iran. The UAE was Iran’s second-largest trading partner, ahead of Turkey, reported Iran International on Aug. 15, highlighting how the war is reshaping Tehran’s foreign trade.
The embargo can also be viewed as a punitive response. It was announced just hours after the UAE Ministry of Defense said it had detected “two ballistic missiles launched from Iran,” a claim Tehran denied, reported Radio Farda, a U.S.-funded Persian-language broadcaster, on Aug. 19.
Threat to Iran’s last economic lifeline
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Dalga Khatinoglu, an oil, gas and Iran economic analyst, wrote in an analysis for Iran International on Aug. 20 that the Emirati trade embargo threatens Tehran’s “remaining economic lifelines.”
“The United Arab Emirates’ decision to halt all trade and financial transactions with Iran threatens one of Tehran’s most important routes for imports, petroleum-product sales and access to international commercial and financial networks,” wrote Khatinoglu, adding that before the war the UAE was the largest destination for Iranian fuel oil and other petroleum products.
The UAE was also Iran’s major outlet for petroleum products. Some 70 percent of Iran’s 256,000 barrels per day of fuel oil in 2025 went to the UAE, according to Iran International.
Meanwhile, Al Hameli said in his statement that the UAE is committed to safeguarding the “robustness” of the global financial system in accordance with international law and what he termed the “highest global standards.”
Analyzing Al Hameli’s reference to protecting the “robustness” of the international economic system, Khatinoglu said the UAE is also looking to protect its position within the global economic order. Even if military tensions ease, he argued, Tehran could continue to face severe economic repercussions.
Al Hameli’s “position is significant because even if political tensions eventually ease, Iranian businesses would still face serious restrictions stemming from US sanctions and Iran’s continued status as a high-risk jurisdiction subject to a Financial Action Task Force call for countermeasures,” Khatinoglu said.
Dubai’s international banking and re-export networks
Experts say the UAE’s trade embargo represents a major step toward reshaping the regional economy around Iran. Dubai’s financial system has for years helped Tehran navigate international sanctions, while Iranian re-exports have also been routed through the UAE.
Kimmitt told Al Jazeera that Dubai was crucial to Iran’s ability to bypass sanctions and move money through the global financial system. Its financial and banking networks “covertly” helped Tehran transfer, receive and convert money internationally, reducing the impact of economic restrictions.
Khatinoglu described Dubai as a well-established center for “Iranian exchange houses, trading companies and intermediaries,” while Kimmitt said Iran could interpret the UAE’s economic restrictions as “bordering on an act of war.” The American analyst compared the move with the US embargo against Japan during the Second World War.
Khatinoglu said Dubai was also a major “re-export hub” for products entering Iran, enabling Iranian companies to obtain goods from international markets that would otherwise be difficult or more expensive to access because of sanctions and other restrictions.
“US sanctions and Iran’s exclusion from much of the international banking system have made this intermediary role particularly important,” he said.
The UAE’s re-export market is enormous. It was worth 734.4 billion UAE dirhams (US$199.97 billion) in 2024, an increase of 7.3 percent from 2023, according to a UAE government release. There is no reliable, detailed figure for Iran’s share of the UAE’s re-exports, but a Reuters report said non-oil foreign trade between the UAE and Iran was worth US$6.6 billion in 2024, with the largest share “represented by re-exports.”
“Goods manufactured in Europe and Asia have routinely entered Iran through UAE-based traders and logistics networks, while Iranian companies have also used Dubai as a route to reach other markets,” Khatinoglu said.
Iranian media response
Iranian media outlets have widely portrayed the UAE’s trade embargo as a move driven by American pressure. A report by the Iranian Students’ News Agency (ISNA) also argued that Tehran should respond by diversifying its trade routes.
“Under pressure from Trump, the UAE halted trade and financial transactions with Iran,” said an ISNA report published on Aug. 21.
“However, concerns over military retaliation and damage to Dubai’s economy have prompted the country to maintain discreet diplomatic channels with Tehran,” said the report.
The ISNA report cited a Wall Street Journal report as saying the Trump administration had been asking the UAE to increase economic pressure on Tehran. It also noted Trump’s warning that any nation providing “assistance” to Iran would face “massive economic consequences.”
ISNA described the restrictions as an “unprecedented move that opens a new chapter in economic relations” and stressed that Dubai would also suffer from tightening the commercial and financial networks that connect it with Iran.
“Experts believe that completely cutting off these financial channels would be difficult, and that monitoring all clandestine activities across the seven emirates would be a limited and complex task,” the ISNA report said.
Valiollah Seif, former governor of the Central Bank of Iran (CBI), said in an analysis for ISNA, published by Donyaye Eqtesad, an Iranian economic newspaper, on Aug. 22, said that in the wake of tightening sanctions Iran does not need to look for a “Second UAE” and that the UAE embargo will “undoubtedly increase the cost of Iran’s foreign trade.”
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