Emirates Wire’s Saturday Long Read is a weekend companion to the daily UAE briefing. Free to read.
Good morning. Steve Moore here, taking a longer walk around a story the daily briefs have only had time to glance at: how the UAE and Iran have historically interacted, how the last six months rewrote the terms, and where Abu Dhabi now finds itself as Washington prepares to turn the screw again.
The Emirates and the Islamic Republic have never been friends. They have, at intervals, been useful to each other. That distinction matters this week, because the useful version of the relationship appears to have run out of road.
The inheritance
The UAE’s Iran problem predates the UAE. On 30 November 1971, two days before the federation formally came into being, Iranian troops landed on three islands at the mouth of the Gulf: Abu Musa, Greater Tunb and Lesser Tunb. Britain was leaving. The Shah moved. When the new federation formed on 2 December, it inherited a territorial dispute it has never resolved.
The islands sit in the sea lane the whole Gulf trades through. Iran took full control of Abu Musa in 1992. Ahmadinejad visited in 2012 and set off a diplomatic row. Tehran has more recently opened new maritime offices there. The UAE’s position throughout has been that the islands are its own, the occupation illegal, and resolution belongs at the ICJ. Iran has ignored that position at every stage.
Alongside the grievance ran the pragmatism. Dubai has been Iran’s shop window and back door for most of forty years, providing hard currency, re-export trade, and a Persian-speaking merchant class that predates the federation itself. When Washington broke with the JCPOA in 2018, Emirati banks tightened compliance. When Riyadh restored ties with Tehran in 2023, Abu Dhabi followed suit. The UAE reinstated its ambassador in Tehran in August 2022, six years after downgrading relations in solidarity with Saudi Arabia. Iran sent its envoy back the following April. By 2024, non-oil trade had climbed above $27 billion, with one Iranian trade publication setting a $30 billion target that would make the UAE Iran’s second-largest trading partner in the world.
That was the shape of things at the start of the year. A hostile neighbour on the far side of a strait, occupying three UAE-claimed islands, and a trading relationship worth roughly the same as Britain’s annual defence budget.
What changed before the war
Two things, in slow motion, and then everything at once.
Since the Abraham Accords in September 2020, the UAE has been anchored more publicly than any other Gulf state to Israel, and by extension to the US posture in the region. The Emirati bet was that formal opening to Israel would deliver security cooperation, US goodwill, and a hedge against Iran’s regional projection. That bet ran alongside the reopening of the Tehran embassy. Emiratis are used to holding two things at once.
Then the run-in. Through 2025 and into February this year, Iran’s uranium stockpile crept past weapons-grade thresholds and IAEA verification collapsed. On 6 February, Trump signed an executive order setting up a tariff mechanism against any country buying Iranian goods. On 27 February, an emergency NSC meeting reportedly closed with the president saying “let’s finish this.” By late that evening, Operation Epic Fury was in the air.
The war on the UAE
The war began at Iranian targets. Within hours, it was in the UAE.
Around 12:53 pm local time on 28 February, Iran launched its first missile and drone salvo at the Emirates. Kuwait, Qatar and Bahrain were hit at the same hour. The UAE stood out for volume. Between 28 February and 17 May, Iran fired more than 6,700 drones and missiles at the six GCC states, and nearly half of them were directed at the UAE. One early Reuters analysis put the Emirates’ share of overall strikes at 63 per cent. By 5 May, Al Jazeera counted at least 2,800 missiles and drones aimed at the UAE during the five weeks of full-intensity fighting, more than any Gulf state and more than Israel.
The damage list reads like an atlas of everything the UAE has built its reputation on. Fujairah’s oil industry zone was hit repeatedly, with a major fire on 4 May setting the Fujairah Petroleum Industries facility ablaze. A drone took the Shah gas field offline on 16 March. Intercept debris twice damaged Habshan gas processing, and it is not expected to run at full capacity until 2027. On 17 May, a drone hit an electrical generator on the outer perimeter of Barakah Nuclear Power Plant, launched from Iraq and traced back to Iran. Buildings near Dubai airport were hit. Hotels emptied. Expatriates started leaving.
By early March, three foreign nationals had been killed and 58 injured in the UAE. The federation withdrew its ambassador from Tehran in protest. The Central Bank stood up a five-pillar resilience package on 17 March; Dubai followed with a Dh1 billion support package on 30 March. By early May, 65,000 UAE customers had taken up loan deferrals and other relief.
A US-brokered ceasefire took effect on 8 April. Within a month it was breaking down. On 4 May Iran hit Fujairah again, injuring three Indian nationals, and fired on an empty ADNOC oil tanker off the coast. By the time Iran launched its second ballistic barrage at Israel and US bases on 7-8 June, the April truce was history.
The Tahnoun channel
Somewhere between the second Fujairah fire and the ballistic barrage, Abu Dhabi decided that hawkishness had run its course.
On 12 June, Reuters reported that Iranian Revolutionary Guards officials had flown to the UAE the previous week, met Sheikh Tahnoun bin Zayed al Nahyan (the president’s brother, national security adviser and deputy ruler of Abu Dhabi) and stayed at his guest house. UAE officials then travelled to Tehran to work out the mechanism. Two regional sources told Reuters the UAE had agreed to release $10 billion, with more than $3 billion already delivered. Two other sources put the eventual figure at $20 billion. In exchange, Iran would stop firing missiles and drones at the Emirates, and the two governments would rebuild bilateral ties, including intelligence sharing and economic cooperation.
Reuters said it could not establish whether the funds belonged to the UAE or were being unblocked from long-frozen Iranian accounts in the Emirati banking system. The distinction is not academic. A UAE loan would sit very differently in Washington than the release of Iran’s own money.
The UAE denied the story. The foreign ministry said, “these allegations are entirely false and unfounded, stressing that no frozen Iranian funds have been released, transferred or facilitated through the UAE”. That denial rejected the specific claim that funds had moved through the Emirates. It did not directly address whether Abu Dhabi was involved in any mechanism at all. And it landed in the same window that the Islamabad memorandum was being finalised.
Islamabad and the peace that wasn’t
On 14 June, the US and Iran digitally signed a 14-point ceasefire memorandum in Islamabad, mediated by Pakistan, with a hard copy following at Versailles on 17 June. It gave the two sides 60 days to reach a final deal, lifted the US naval blockade within 30 days, promised a $300 billion reconstruction package for Iran, and set out sanctions relief and asset releases in exchange for Iranian commitments on Hormuz mine-clearing, free passage, and enrichment.
The MoU held for perhaps a fortnight before both sides accused the other of breaching it. Trump called Iranian strikes in the region “a foolish violation” on 27 June and declared the deal “over” on 7 July. US attacks resumed. Iran’s foreign minister, Abbas Araghchi, said the MoU had marked “the end of the war, not a ceasefire,” and that because Washington had breached it, “there was no 60-day ceasefire that needed to be extended.” The 60-day window formally expired on Monday.
This week
Which is where the picture sharpens.
On Tuesday, the UAE Ministry of Defence detected two ballistic missiles launched from Iran, said its assessments were that they targeted maritime traffic, and reported that both fell into the sea. Residents received the first mobile-phone threat alert in months. Iran called the maritime-targeting account “baseless.”
Abu Dhabi’s response, on Tuesday evening, was the most consequential shift in bilateral policy since the reset of 2022. Afra Al Hameli, director of strategic communications at the UAE foreign ministry, said in a statement: “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. Anwar Gargash, the president’s diplomatic adviser, went further, calling rumours about “the provision of financial facilities to Iran” false and part of “desperate media campaigns.” Whatever the terms of the June arrangement, whether loan, unfreezing, or back-channel accommodation, the UAE was formally out.
The scale of what has just been switched off is substantial. WTO figures cited this week put UAE goods exports to Iran at around $21 billion in 2024, some 30.6 per cent of all Iranian imports. Iranian customs data put the two-way flow above $29 billion in the previous Iranian year. This is Iran’s second-largest trading partner announcing that the shopfront and the back door are shut on the same evening.
And now Washington
The timing is what to watch.
On Thursday of last week, Treasury Secretary Scott Bessent told Newsmax to “watch this space for more announcements coming next week because we are going to apply measures like have never been seen in the history of economic isolation on a country”. Bessent framed the coming measures as a “one-two punch” alongside the naval blockade. On Wednesday, Trump himself promised the “most crushing economic operation ever” against Iran and threatened “tremendous economic consequences” for any country doing business with Tehran.
The reporting on what “never before seen” actually means points two ways. Secondary sanctions on the independent Chinese refineries known as teapots, the last significant buyers of Iranian crude, and the designation of major Chinese banks that handle Iran-linked funds. Washington has threatened the latter step for years without taking it. Brett Erickson of Obsidian Risk Advisor told Al Jazeera that action against Chinese banks doing business with Iran, combined with “real enforcement of the UAE’s claim to be cutting off business with Iran,” could become “truly potent.”
That is striking praise. It also puts the UAE’s Tuesday announcement in a very specific frame. Washington has been asking the Gulf to make its position enforceable, not simply stated. Abu Dhabi has provided the enforceable version forty-eight hours before Bessent’s promised week.
Where this leaves Abu Dhabi
A few observations worth stating plainly.
The Emirati calculation has come back to where it started. Iran was a hostile neighbour before the Abraham Accords, during the 2022 reset, and today. The variations in between have been about how loud that hostility is allowed to become.
Tuesday’s embargo has not buried the alleged loan story, and the timing invites more questions than it settles. Reuters’ June sourcing has never been rebutted on the substance, only on the wording. If any part of the $10-20 billion arrangement did happen, the missile that fell into the sea on Tuesday is more than a security event. It is a broken deal.
Abu Dhabi has meanwhile made itself very useful to Washington in a week when Washington needs to be seen enforcing something. Iran now has fewer routes to trade its way through sanctions. The UAE has fewer routes to be quietly indispensable to both sides.
Emirates Wire will be watching the sanctions package as it lands, whether the trade suspension is enforced against Emirati re-exporters and free zones as tightly as announced, and whether the June channel that ran through Tahnoun’s guest house has been closed, paused, or simply relocated. Neighbours do not disappear. This one has just been told the shop is shut.
Thoughts, tips or corrections are always welcome. Reply to this email or write to me at steve@emirateswire.co.uk. If it’s worth someone else’s time, please pass it on. Back on Monday at 7:30 am with the daily.
— Steve
Steve Moore is editor of Emirates Wire. Launching in London on 9 September 2026 at the National Liberal Club. emirateswire.co.uk · steve@emirateswire.co.uk
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How this piece was made
Reported and written by Steve Moore with research aggregation and early drafting assistance under close editorial control. All claims cross-checked against original reporting. Principal sources: Reuters (12 June and 19 August 2026 on the alleged UAE-Iran financial arrangement and the trade suspension); CNBC (13 June 2026 for the UAE denial); Bloomberg (14 August 2026 on Bessent’s remarks); Al Jazeera (16, 18 and 19 August 2026 on the Islamabad MoU and forthcoming sanctions); the Congressional Research Service’s June 2026 brief on the Arab Gulf states and the Iran conflict; the Institute for the Study of War on the 17 May Barakah incident; Wikipedia and RUSI on the 1971 seizure of Abu Musa and the Tunbs; The National, Gulf News and The New Arab on UAE-Iran trade volumes; the Guardian, BBC and Washington Institute on the islands dispute; the UAE foreign ministry’s public statement of 2022 on the ambassador’s return. Any errors are mine.
Spot on analysis on the operational impact, Steve. But reading through the shift on Tuesday, it feels like we’re watching the inevitable breakdown of a fundamental hedge.
For years, the UAE tried to hold two mutually exclusive positions: acting as the primary economic pressure-valve and shopfront for Iran while simultaneously serving as the critical staging ground and strategic anchor for the US-Israeli regional security posture. They were in the passenger seat of that military strategy, fully aware of where it was headed, while trying to run a thriving trade route with the target.
When the strikes hit Habshan, Fujairah, and Barakah, the illusion that you can host the staging ground without drawing fire completely dissolved. Tuesday’s embargo isn’t just Abu Dhabi playing nice with Washington hours before a sanctions rollout - it’s the hard realization that when the strategic choice is forced, the economic benefits of being Iran's backdoor can hardly outweigh the physical vulnerability of hosting its adversaries.
Only time will tell whether this hard pivot ultimately delivers the security Abu Dhabi is paying for, or just solidifies its position on the front line.