What to Know About Iran’s Economic Ties With Gulf Countries

For years, the United Arab Emirates has been a lifeline for Iran’s sanctions-battered economy, despite political tensions between the two countries.

But that relationship was imperiled on Tuesday, when the Emirates announced a total embargo on trade and transactions with the Islamic republic. If the threat holds, Iran would lose not just a major market for its goods but a portal to the world economy, ***ysts say.

Afra Al Hameli, an Emirati Foreign Ministry spokeswoman, said the decision had been made “in light of regional escalations,”

The embargo highlights both the depth of the economic relationships that Iran has cultivated across the Gulf region and the strain they are now under. The war that the United States and Israel began in late February and Iran’s ensuing blockade of the Strait of Hormuz have dampened growth across Gulf countries, throttling the energy exports those nations rely on.

Here is what to know about Iran’s trade relationships in the Gulf.

The economic “lung” of Iran

Located just 50 miles across the Persian Gulf from Iran, the Emirates has traded with its neighbor for centuries. Today, it hosts hundreds of thousands of Iranians and is Tehran’s most important trading partner in the Gulf region, ***ysts said.

In 2024, the Emirates supplied about a third of Tehran’s imports, according to World Trade Organization data, ferrying key electronics, precious metals and consumer goods to the Islamic republic. It is also one of Iran’s top export destinations, particularly for staple products like food and spices.

Over the years, these ties have made the Emirates — and particularly its largest city, Dubai — key to Iran’s efforts to evade international sanctions, experts say, especially as a hub for re-exporting Iranian goods around the world.

“The U.A.E. has been described as the lung of Iran, the means through which the Iranian economy can access the global economy,” said Andrew Leber, a Middle East expert at the Carnegie Endowment for International Peace.

Emirati ties with Iran have elicited complaints and pressure from American authorities in the past. Emirati officials say that they crack down on sanctions violations when they find them and deny that their country helps Iran dodge the restrictions.

The stakes of an Emirati embargo

Though Iran and the Emirates butt heads for political and security reasons, ***ysts said they have maintained trade ties over the years for their mutual benefit. Mr. Leber said the decision to enforce an embargo would be a “major rupture,” but experts differed on how much it would affect Iran’s economy.

“This move is unlikely to be the geoeconomic straw that breaks the camel’s back when it comes to the Iranian economy,” said Robert Mogielnicki, a Gulf economy expert at the Arab Gulf States Institute, a research group. He said Iran has built its economy to resist external shocks and prioritize “self sufficiency,” arguing that the “model is not overly dependent on the U.A.E.”

Miad Maleki of the Foundation for Defense of Democracies, a Washington think tank, said that the Emirati embargo would be the “most consequential economic action of this war for Iran,” and potentially “more significant than the embargo being put on by the United States.” He argued that with other naval blockades in the region, the Emirati trade cutoff would be particularly punishing.

It is also unclear how seriously and swiftly the Emirati government will move to enforce a suspension of economic ties.

The Emirates bore the brunt of Iran’s attacks on U.S. allies in the Gulf, fending off thousands of missiles and drones.

The Emirati government did not specify when the decision to halt trade had been made or what had prompted it. Last week, the Emirates accused Iran of attacking an Emirati oil tanker traveling through the Strait of Hormuz. The embargo was announced soon after the Emirati government accused Iran of launching missiles toward its territory, which Iran denied.

In the face of Iran’s attacks, the Emirati government has doubled down on its alliances with Israel and the United States. It is unclear if the United States played a role in the embargo decision. The announcement came hours after a call from President Trump to the Emirati leader, Sheikh Mohammed bin Zayed.

Other Gulf countries

Mr. Leber said there are longstanding ties between Iran and trading communities on the Arab side of the Gulf. Oman, for example, is an important trading partner, with commerce between the two countries increasing over the past decades, even during periods of U.S. sanctions.

But other Gulf countries are less directly enmeshed with the Iranian economy than the Emirates is. Their ties to Iran are largely “limited and inconsequential,” Mr. Mogielnicki said.

Still, the war and Iran’s attacks in the region have significantly affected Gulf economies: The International Monetary Fund has projected economic contractions for Qatar, Kuwait, Bahrain, the Emirates and Oman. The fund has also estimated up to a 7 percent total loss in output over the next five years in the Gulf.