The United Arab Emirates has suspended all trade, commercial exchanges and financial transactions with Iran until further notice following a renewed regional escalation that saw the UAE detect two ballistic missiles launched from Iran. The move puts some $28 billion in bilateral goods trade at risk. World Trade Organization data shows Iran imported some $21 billion in goods from the UAE in 2024, or 30.6% of all Iranian imports that year. Iran also exported around $7.16 billion in goods to the Emirates.

The UAE Foreign Ministry said the decision followed regional escalations that undermine regional and international peace and security. It reaffirmed the country’s commitment to dialogue, cooperation and regional integration while emphasizing its commitment to safeguarding the integrity of the international financial system.

The UAE Defense Ministry said two ballistic missiles were launched from Iran toward the country on Tuesday. One fell outside Emirati territorial waters while another landed within them, with no reported injuries or damage.

The ministry said the missiles were assessed to be targeting maritime traffic. Both missiles fell into the sea, according to its earlier statement.

Iranian Foreign Ministry spokesperson Esmaeil Baghaei rejected the UAE’s statement early Wednesday, describing it as “baseless.”

The UAE has also accused Iran of a series of attacks on vessels linked to Abu Dhabi National Oil Company in the Strait of Hormuz. Three such incidents were reported in less than a week, prompting the UAE Foreign Ministry to call on Tehran to stop what it described as unprovoked attacks and fully reopen the strategic waterway.

The economic cutoff represents a sharp reversal in ties that Abu Dhabi had spent years trying to stabilize. The UAE downgraded diplomatic relations with Iran in 2016 amid wider tensions between Tehran and Gulf Arab states. It began rebuilding the relationship several years later, returning its ambassador to Tehran in 2022. Iran appointed an ambassador to the UAE the following year.

Economic relations continued to deepen despite political disputes. In April 2024, the two countries held their joint economic commission for the first time in a decade. Iranian customs figures at the time showed the UAE was Iran’s largest source of imports, with $20.8 billion in goods shipped to Iran during the fiscal year ending in March 2024.

That thaw began to unravel after the US-Israeli war with Iran erupted on February 28, 2026. Iran launched missile and drone attacks across the Gulf in retaliation, including strikes targeting the UAE. Abu Dhabi closed its embassy in Tehran and withdrew its diplomatic mission on March 1, warning that the attacks would have serious consequences for bilateral relations.

Despite the fighting, Emirati officials continued to favor diplomacy and de-escalation. That position has come under increasing pressure as attacks on shipping resumed and tensions around the Strait of Hormuz intensified.

A full UAE trade and financial halt would therefore go beyond a diplomatic protest, potentially severing one of Iran’s most important commercial links to the outside world while Tehran is already facing international sanctions and pressure on its shipping, banking and energy sectors.