Economic Dependence Between Iran, the UAE, and the Impact of Israel

Extensive Economic Ties Between Iran and the UAE

Iran and the UAE have viewed each other as vital economic partners for years. The UAE—especially Dubai—has become one of Iran’s largest and most strategic trading partners. This relationship has evolved due to several key factors:

UAE as a Regional Trade Hub

Dubai, as the commercial and financial center of the region, functions as a transit hub and trade intermediary for Iranian goods. Due to international sanctions, Iran has been unable to engage in direct trade with many countries. As a result, many goods are first imported into Dubai, and then re-exported to Iran through intermediaries. This indirect route has enabled Iran to continue importing industrial goods, consumer products, and even sensitive materials. In addition, the UAE acts as a transit and storage point, and even a sales market for Iranian goods.

Volume of Trade

The volume of trade between Iran and the UAE in recent years has fluctuated between $10 billion and $20 billion, depending on political and economic conditions. The UAE is one of Iran’s largest sources of imports and has, in some years, been the top exporter of goods to Iran.Imported goods include consumer electronics, home appliances, auto parts, industrial equipment, food products, and pharmaceuticals. Conversely, Iran exports petrochemicals, minerals, foodstuffs, and fuel to the UAE.

Iranian Investment in the UAE

Iranians form one of the largest economically active expatriate communities in the UAE, with over half a million Iranian nationals living and working in the country. Iranians have made significant real estate investments in Dubai and other Emirates. Many service, trade, logistics, and financial firms in the UAE are either fully or partially owned by Iranians. As a global financial hub, the UAE provides Iranian entrepreneurs with a platform to register companies and conduct international transactions.

UAE as a Gateway for Goods

The UAE acts as a major entry and exit point for goods destined for Iran. Much of Iran’s imported goods are shipped through Dubai’s ports. These goods include consumer products, raw materials for factories, spare parts, and even sanctioned items imported via indirect routes.

As a result, the UAE is heavily reliant on Iranian market activity, and any disruption in political or economic relations between the two countries could significantly impact regional trade.

2. Impact of Iran–Israel War on the UAE

Rising Regional Tensions and Uncertainty

A war between Iran and Israel—two of the region’s most powerful and contentious players—could significantly escalate the security risks across the Persian Gulf. This area, critical for its geopolitical and economic importance, particularly in energy exports and maritime trade, remains highly vulnerable to military and political crises.

As war intensifies, regional uncertainty rises, directly affecting coastal nations like the UAE. The Persian Gulf is considered a vital energy corridor, and any disruption could severely impact global oil shipments and essential trade.

Political Repercussions for the UAE

The UAE, which seeks to maintain stability and economic growth, may be forced to reassess its security and diplomatic strategies amid rising tensions. While aiming to preserve ties with Iran, the UAE also seeks to maintain strong relations with Western powers and regional allies to safeguard its own national security. Impact of the Iran-Israel War on the UAE: Political, Economic, and Strategic Implications

Political Caution and Mediation Role

In response to rising tensions and regional instability, the UAE may adopt a more cautious political stance to preserve its strategic position and potentially play the role of a regional mediator or at least a stabilizing actor.

Economic and Commercial Consequences

• Heightened military and security risks in the region can severely disrupt trade flows and investment activities between Iran and the UAE.
  
• Foreign companies operating in the UAE—particularly those with links to Iranian markets—may delay or scale back their investments and projects due to rising uncertainty.
  
• The insecurity in the Persian Gulf could lead to declines in tourism, regional trade, logistics, and other key economic activities, which form a major part of the UAE’s non-oil economy.
  
• Insurance premiums and maritime transportation costs may increase significantly, raising the price of goods and services throughout the region.
  

Impact on Iranian Investments in the UAE

• The Iranian business community in the UAE will likely feel the effects of heightened tensions. Decreased trade and increased risks can destabilize Iranian investments and businesses operating in the Emirates.
  
• Political pressures may result in tighter regulations or restrictions on Iranian-linked companies or financial transactions.
  

UAE’s Prospective Response and Strategy

• The UAE is expected to strengthen its security cooperation with neighboring countries and global powers in an effort to safeguard regional stability.
  
• The country may pursue more diplomatic engagements with Iran and other regional actors to de-escalate tensions through dialogue and mutual understanding.
  
• Strategically, the UAE continues efforts to diversify its economy and reduce dependence on regional trade, improving its resilience against future crises.
  

Phone Call Between Iranian President and UAE Leader: Efforts to De-escalate Tensions Amid War Amid the escalation of military conflict between Iran and Israel, Iranian President Masoud Pezeshkian held a telephone conversation with UAE President Sheikh Mohamed bin Zayed Al Nahyan on Monday, June 17, 2025. The call came at a time of high regional anxiety and was of major diplomatic significance for the Middle East.

Key Points of the Conversation

1. UAE’s Message of Sympathy and Support

Sheikh Mohamed began the call by expressing solidarity with the Iranian people in light of recent developments. He emphasized the UAE’s commitment to regional stability and stated that his country is actively engaged in regional and international efforts to de-escalate the crisis.

2. Iran’s Position on the Conflict

President Pezeshkian highlighted Israel’s military aggression and its impact on civilians. He described the situation as a violation of international law and a threat to lasting peace in the region, condemning the killing of unarmed civilians.

3. Emphasis on Diplomacy and Regional Mediation

The UAE leader welcomed diplomatic solutions and said his country would support any international or regional initiative for ceasefire or peace mediation. He confirmed that the UAE is actively consulting with other global and regional powers to lower tensions.

4. Security in the Strait of Hormuz

Both leaders discussed the security of maritime routes in the Persian Gulf and the Strait of Hormuz. Given the strategic importance of this waterway, especially for the UAE (and Dubai as a commercial hub), both sides stressed the need for ongoing coordination to ensure stability and open navigation.

5. Continued Dialogue

They agreed to maintain communication channels and explore joint efforts to mitigate the economic fallout of the war, enhance cooperation, and preserve regional calm.

Significance of the Call

This conversation took place at a moment of extreme geopolitical tension. The UAE, which has maintained diplomatic relations with Israel in recent years while also sustaining deep economic ties with Iran, now finds itself in a strategic crossroads.

The call reflects a mutual desire by both Iran and the UAE to keep diplomatic pathways open, prevent escalation, and manage the delicate balance between security, economics, and diplomacy in a highly volatile region. Iran’s 100-Day Control Over the Strait of Hormuz: Regional and Global Implications

Amid escalating military conflict between Iran and Israel, reports have emerged indicating that Iran has declared its intent to assume full control over the Strait of Hormuz for the next 100 days, with all maritime traffic subject to its authorization and supervision. If formally and practically implemented, this would mark one of the most significant strategic shifts in the Persian Gulf in decades.

The Strategic Importance of the Strait of Hormuz

The Strait of Hormuz is one of the most critical energy chokepoints in the world. Over one-third of the world's seaborne crude oil exports pass through this narrow waterway.

• Gulf Arab states, including the UAE, Saudi Arabia, Kuwait, Qatar, and Iraq, are heavily dependent on the Strait for exporting their oil to global markets.
  
• For the UAE in particular, a large portion of both its oil exports and imported commercial goods flow through this passage, making any restriction on shipping a direct threat to its economy.
  

Potential Consequences of Iran's Strait Monopoly

1. Disruption of UAE Oil Exports

The UAE exports around 2 to 3 million barrels of crude oil per day, much of which is transported through the Strait to markets in Asia and Europe.

• A partial or full closure, or even tightened restrictions, could result in export delays, reduced oil flow, and pressure on the UAE’s oil revenues.
  

2. Higher Shipping and Insurance Costs

Any military threat or maritime restrictions in the Strait will likely lead to:

• Higher insurance premiums for ships passing through.
  
• Significant increases in logistical costs for shipping companies.
  
• A reduced willingness among international firms to use this route, unless costly security measures are implemented.
  

3. Reduced Investment and Economic Stability in Dubai

As a regional trade and financial hub, Dubai’s economic model depends on secure and open maritime trade routes.

Disruptions in the flow of imported goods, industrial equipment, food supplies, and UAE exports could lead to:

• Rising consumer prices
  
• Slowed economic growth
  
• Decreased investor confidence
  
• Volatility in financial markets
  

4. Global Reactions and Diplomatic Pressure

Control of the Strait of Hormuz is not merely a regional issue. Major energy-importing nations—such as China, India, Japan, and European countries—would view restricted access as a threat to global energy security.

• This could trigger increased diplomatic pressure or even military involvement from global powers to ensure freedom of navigation.
  

Does the UAE Have Alternative Routes?

In recent years, the UAE has developed alternative oil transport infrastructure, such as the Habshan–Fujairah pipeline, which allows crude oil to bypass the Strait of Hormuz and reach the Gulf of Oman directly.

• However, the capacity of these pipelines is limited, and cannot fully replace the Strait's volume.
  
• Additionally, non-oil imports, including most consumer and industrial goods, still rely on maritime transit through the Strait.
  

UAE–Israel Relations: Foundations, Importance, and the Impact of Hormuz Closure

Official Peace Agreement

In 2020, the United Arab Emirates became one of the first Gulf Arab countries to sign a normalization agreement with Israel, known as the Abraham Accords. This landmark agreement laid the groundwork for extensive cooperation in:

• Trade and business
  
• Scientific research
  
• Cybersecurity
  
• Advanced technology
  
• Space exploration
  

Bilateral Investments

Israeli companies have entered the UAE market in areas such as:

• Technology and innovation
  
• Advanced agriculture
  
• Solar energy
  
• Insurance and financial services
  

Meanwhile, Dubai has become a key hub for Israeli entrepreneurs and investors looking to expand in the Gulf and wider Middle East.

Security Cooperation and Intelligence Exchange

UAE and Israel have developed active cooperation in intelligence and cybersecurity, particularly in:

• Regional threat monitoring (e.g., from Iran and its proxy groups)
  
• Infrastructure protection
  
• Cyber defense systems
  

This partnership reflects shared security concerns and strategic interests in the region. Impact of Hormuz Strait Closure on UAE–Israel Relations Iran’s decision to close or restrict access to the Strait of Hormuz could have dual effects on UAE–Israel relations:

1. Increased UAE Dependence on Israeli Security Cooperation

To protect its oil infrastructure, maritime routes, and commercial hubs, the UAE may become more reliant on Israeli defense technologies and intelligence capabilities.

• Israel may leverage this dependence to expand its military and intelligence footprint in the Gulf region.
  

2. Greater Political Pressure on the UAE from Iran

Depending on the UAE’s stance toward the ongoing conflict, Iran may exert political or security pressure on the Emirates.

• If the UAE supports Israel beyond a diplomatic level, Iran could respond with direct or indirect retaliation.
  
• The Strait’s closure itself could be a warning signal to the UAE not to fully align with Israeli interests.
  

3. Disruption of Triangular Trade (Iran–UAE–Israel)

A portion of the informal or indirect trade and financial exchanges between Iran and Israel has flowed through the UAE, particularly Dubai.

• In a wartime context and with tighter control over the Strait, such gray channels will likely be blocked or deemed too risky.
  

4. Disruption of Israeli Maritime Transit from the Red Sea to the Gulf

The closure of the Strait and rising insecurity in the Gulf could hinder Israel’s shipping access to the UAE, affecting:

• Oil and energy logistics
  
• Technology and commercial goods exchange

Israel’s Next Target? The Growing Threat to Pakistan in the Iran-Israel War As the conflict between Iran and Israel intensifies, concerns are mounting over the possible expansion of hostilities to neighboring countries. Israel has made it clear that its primary objective is to dismantle nuclear capabilities in the Middle East, targeting armed groups and regional powers en route to Iran.

Pakistan, possessing its own nuclear arsenal and maintaining close ties with Iran, is increasingly viewed as a potential next target. In response, Pakistan has openly supported Iran, seeking to strengthen regional alliances and resist Israeli threats.

This precarious position places Pakistan at significant risk of direct involvement in the conflict, which could destabilize internal security and further escalate tensions across the region. The coming weeks will be critical in determining how Islamabad manages diplomatic pressures and navigates this escalating crisis. UAE’s Geopolitical Dilemma: Between Two Fires

The UAE is now caught between two powerful and conflicting actors:

• Its new strategic ally, Israel, is engaged in open conflict.
  
• Its longstanding economic partner and neighbor, Iran, is asserting control over a key maritime route.
  

In this fragile context, the UAE—especially Dubai—must pursue a carefully balanced, multi-layered foreign policy, which includes:

• Maintaining cooperation with Israel in technology, trade, and defense
  
• Sustaining economic and diplomatic ties with Iran to ensure supply routes and regional calm
  
• Positioning itself as a potential mediator in broader regional conflict de-escalation
  

Risks and Opportunities

• If the UAE loses this delicate balance, it risks economic losses and regional insecurity.
  
• But if it manages the situation effectively, the country could strengthen its image as a neutral, pragmatic, and influential actor in Middle East geopolitics.
  

Important Notice and Financial Advice for Iranians, Afghans, and Pakistanis in the UAE Amidst the Iran-Israel Conflict

As the conflict between Iran and Israel continues, regional instability is rising, affecting not only political and security dynamics but also economic conditions. For the hundreds of thousands of Iranians, Afghans, and Pakistanis living and working in the UAE—especially in Dubai—this situation demands caution and proactive planning.

Key Financial and Safety Recommendations:

1. Reassess and Diversify Your Investments
   In uncertain times, avoid concentrating your assets solely in one country or sector. Consider moving some investments to safer markets or more stable currencies to minimize risks.
   
   
2. Maintain Adequate Liquidity
   Keep sufficient cash reserves to cover essential expenses in case of sudden market disruptions or restricted access to funds.
   
   
3. Stay Informed and Monitor Developments
   Follow reliable news sources and official updates about regional security and economic changes to make timely and informed decisions.
   
   
4. Avoid Impulsive Financial Decisions
   Stress and uncertainty can lead to rash choices. Consult experts before making large transactions or commitments.
   
   
5. Plan for Possible Disruptions in Trade and Mobility
   Prepare for potential interruptions in supply chains, travel restrictions, or changes in work conditions that might arise if the conflict escalates.
   
   
6. Protect Your Legal and Financial Interests
   Review your contracts, residency status, and business agreements to ensure compliance and readiness for any changes.
   
   

The Role of Dar Al Tharwah

At Dar Al Tharwah, we recognize the heavy burden this conflict places on expatriates and investors in the region. That’s why we offer free, confidential consultation services to help you navigate financial, legal, and personal challenges during this crisis.

Whether you need advice on:

• Safeguarding your investments
  
• Navigating property or business matters
  
• Planning financial strategies during instability
  

"Start a Quality Financial Future with Dar al Tharwah."