The United Arab Emirates (UAE) announced on August 18 that it had suspended commercial activities and financial transactions with Tehran until further notice, following what it said were two missiles launched from Iran.
The suspension covers not only goods trade but also payment and financial channels. This could have an impact on the economic ties between Iran and the UAE that goes beyond trade restrictions alone.
The UAE’s share of Iran’s imports
According to 2024 data, Iran’s total goods imports amounted to $68.5 billion. The UAE supplied $21.01 billion worth of goods, accounting for 30.6% of Iran’s imports and making it the country’s largest source of imports, ahead of China and Türkiye.
The trade volume between the two countries varies depending on the period and the definition of trade used. The figure reached about $27 billion in 2024 and is assessed at roughly $30 billion in line with Iran’s target of increasing it to that level.
In the Iranian fiscal year ending in March 2025, imports from the UAE amounted to $21.9 billion, while Iran’s non-oil exports to the UAE were recorded at $7.2 billion. These figures are consistent with estimates that the two countries’ annual trade volume is about $30 billion.
Exports and supply chains could come under pressure
The UAE is a major hub for Iran’s exports as well as its imports. Iran’s total goods exports amounted to $56 billion in 2024, while the UAE was the country’s third-largest export market, with $7.16 billion in trade and a 12.8% share.
China ranked first in Iran’s exports with a 26% share, followed by Iraq with 20.9%. The interruption of trade with the UAE could therefore put pressure on Iran’s supply chains and export revenues.
Dubai’s re-export role
Not all of the products Iran buys from the UAE originate there. Goods brought to the UAE from China, Europe, India or other countries can be sent to Iran through Dubai-based trading companies and logistics networks.
This shows that the UAE’s role as a $21 billion source of imports for Iran does not mean that the same value of domestically produced goods is being sold. Dubai has long served as a re-export hub for Iran’s regional and international trade links.
Financial disruption could raise costs
The suspension of financial transactions could narrow payment channels for Iranian companies and make trade financing more expensive. Higher logistics costs could also increase the prices of imported goods.
Iran’s economy faces serious restrictions on access to external financing and foreign-currency inflows. A prolonged commercial and financial disruption could increase price pressures in the Iranian economy, which is struggling with high inflation.
UAE services and stock markets could also be affected
The economic cost of the disruption may not be limited to Iran. As Iran has long been one of Dubai’s important trading partners, re-export, logistics and financial services could also be affected by the decision.
Following the decision, the Abu Dhabi index fell 0.9%, while the Dubai index declined 0.3%.
A pause in economic rapprochement
The UAE and Iran had been trying to rebuild their economic ties in recent years. Diplomatic relations deteriorated in 2016, but rapprochement began again from 2019, and diplomatic contacts strengthened in 2023.
The two countries’ joint economic commission met again in Abu Dhabi in April 2024, after a 10-year hiatus. The latest decision has created a new disruption in commercial relations following that economic rapprochement.
