The United Arab Emirates, apparently responding to Washington’s declaration of “ECONOMIC D-DAY,” has declared that it will cut off all transactions with Iran, valued at nearly $30 billion as of 2024. While analysts are skeptical about Abu Dhabi’s vow, analyses in Middle East Policy show that such an embargo would test two strategies at once: Tehran’s efforts to survive US economic warfare through relations with its neighbors, and the UAE’s ambitions to bolster its resilience and autonomy as it diversifies its economy and foreign relations.
Middle East Policy has just published its Summer 2026 double issue, featuring incisive open-access examinations of the Iran War, its causes, and its implications, including what lies ahead in the Strait of Hormuz; how Trump’s transactionalism is backfiring; how the Islamic Revolution upended regional security; Iran’s forward defense in Africa; and the effects of the war on Gulf cooperation with the Asia-Pacific. Many more analyses of vital interest can be found in the table of contents below. If you find this article useful, please forward it to others you believe will benefit. You can register to receive our weekly updates here. And please follow us on the social media platforms X and LinkedIn.
In their open-access analysis, Mahjoob Zweiri and Nael Abusharar provide data that help explain how the new embargo—imposed as the United States seeks to increase its leverage in the Iran War standoff—targets a key mechanism of Iranian economic resilience. The authors acknowledge that during the first Trump administration, the United Arab Emirates “adopted many US sanctions” on Iranian businesses operating within its territory, but Emirati firms continued to trade oil produced by the Islamic Republic. Indeed, in 2018, “the UAE was classified as the third-largest market for Iran’s non-oil exports and its second-largest import partner.” By 2020, Washington had levied heavy sanctions on such activity.
In response to President Donald Trump’s maximum pressure campaign, unleashed after he abrogated the Iran nuclear deal, the authors show that Abu Dhabi responded by
limiting and restricting the renewal and issuance of residence permits for Iranians, and putting restrictions on the banking and financing activities related to deals with Iran in the UAE banking and financial system. This created a number of obstacles for UAE-based companies that conduct financial and trade operations with Iranians. Moreover, many Iranian businesses in the UAE have been accused of terrorist activities….The authorities placed a lot of obstacles in front of the Iranian traders, forcing many of them to look for other locations for their businesses and investments.
“However, limiting trade relations with the UAE was not an easy task,” Zweiri and Abusharar write. “It had been Iran’s main gateway to the world and its principal trading partner for decades. The UAE’s trade with Iran remains much greater than that of any other country in the region.” Therefore, if the new embargo is enforced, a relationship that previously helped Iran withstand US economic pressure could instead become one of Washington’s most powerful sources of leverage.
The UAE may be better positioned to cut off trade with Iran than it had been in the past, as it has sought to diversify its economy and increase its geopolitical flexibility. A new open-access analysis by Ahmet Hakan Özkan demonstrates that despite the major disruption to the Strait of Hormuz—which is carefully examined in Gawdat Bahgat’s vitally important Middle East Policy analysis—Abu Dhabi has more options than ever to absorb a shock from the loss of trade with the Islamic Republic:
The UAE’s evolving approach to coordinating supply arrangements within OPEC and OPEC+ suggests a shift toward a more flexible and autonomous oil strategy. This reflects an increased emphasis on capacity utilization, market share, and long-term strategic positioning rather than strict adherence to collective production constraints. Under conditions of heightened geopolitical uncertainty…and the resulting price volatility, such flexibility may allow the UAE to better align short-term revenue generation with longer-term diversification objectives.
Özkan examines the UAE’s structural transformation, diversified generation—including nuclear power—and integration into global clean energy finance networks. He contends that this model will provide Abu Dhabi greater flexibility to adapt to wartime conditions. This could help blunt the impact of cutting off Iran—if the UAE upholds its promise.
While economic diversification enables a potential embargo, Sherko Kirmanj and Ranj Tofik show that the Emiratis have long seen containing Iran as a key geopolitical interest. This has historical roots in disputed sovereignty over the islands Abu Musa and the Greater and Lesser Tunbs, but the rivalry between Abu Dhabi and Tehran intensified after the Arab Spring as the UAE grew deeply concerned about Islamism. Most acutely, though indirectly, separatists backed by the Emiratis opposed the Iran-backed Houthi movement as it sought to consolidate control over Yemen.
“In 2010, the UAE ambassador to Washington, Yousef Al Otaiba, declared that ‘there is no country in the region that poses a threat to the Emirates, except Iran,’” the authors write. “For his part, Iranian Foreign Minister Javad Zarif in 2019 accused [UAE President Mohammed bin Zayed] and [Saudi Crown Prince Mohammed bin Salman] of plotting against his country with Israeli Prime Minister Benjamin Netanyahu and John Bolton, US President Donald Trump’s national security adviser.”
Still, there is a difference between the UAE’s pre-Iran War containment policy and the complete economic isolation that Trump wants the Islamic Republic’s neighbors to impose. Kirmanj and Tofik contend that, given Emirati economic and historical ties to Tehran, Abu Dhabi did not aim for regime change. Instead, the authors assert about the goals before this year’s crisis, “the UAE seeks a relatively weak Iran, a state unable to pose a threat but in need of economic relations.”
Trump’s “economic D-Day” also puts to the test Iran’s strategy to avoid isolation. Although the Islamic Republic has unleashed attacks on Gulf states throughout the conflict—allegedly this includes two ballistic missiles aimed at the UAE this week—Mehran Kamrava and Ali Bagheri Dolatabadi show that Tehran had long sought to absorb the worst of American and Western sanctions by cultivating ties with its neighbors.
The Iranian neighborly policy was, and continues to be, driven primarily by realpolitik considerations. Washington’s 2018 withdrawal from the nuclear agreement and the Biden administration’s continuation of Trump’s regional policies have deepened Iran’s economic woes and made its reintegration into the international community more difficult. This prompted Iranian policy makers to look for potential advantages within the country’s geopolitical circumstances. Tehran thus sought to use good relations with regional states, coupled with cross-country, north-south, and east-west transit and logistical corridors, to link its economic fortunes with those of its neighborhood. As such, Iran’s pursuit of good neighborly relations is motivated as much by economics as it is by strategic concerns.
Kamrava and Bagheri Dolatabadi note that while Tehran gained from continued economic ties to the Gulf Arab states, those countries also benefited from the reduced tensions, both in Yemen and closer to home. For several years, from the beginning of Ebrahim Raisi’s term as Iranian president in 2021 through early 2026, the Islamic Republic recognized that “the strategic gains of continued, improved ties with Riyadh and Abu Dhabi outweigh the desire to attack Israel.” However, the authors conclude, this relative detente was always subject to shifts in behavior by states outside the Gulf:
Strategic objectives may change, not just in Tehran but also in neighboring capitals, and these actors may revert to seeing greater advantages in conflict and containment than in comity. The war in Gaza and the role that Israel plays in Iranian security calculations add to the uncertainty over the long-term viability of Iran’s neighborhood policy.
For more examinations of the effects of the Iran War on regional economic and geopolitical behavior, readers should see our open-access coverage of the differences between Iran’s and Qatar’s fortunes in the energy markets; the vulnerabilities of the Islamic Republic’s energy infrastructure; and the developing nexus between GCC energy producers and the Asia-Pacific region.
Middle East Policy, Summer 2026
Special Double Issue!
AMERICA’S WAR ON IRAN
Signals, Red Lines, and Collision: The Israel-Iran Spiral and US Intervention
Buğra Sari—open access!
Trump’s Transactional Diplomacy: Breakthrough or Breakdown?
Guilain Denoeux | Robert Springborg—open access!
Between Ideology and Strategy: The Iranian Revolution and the Reconfiguration of Middle Eastern Security
Alabbas F. Alsudani—open access!
Iran’s Forward Defense in Sub-Saharan Africa
Ariel Limanya Limbu | Ronen A. Cohen—open access!
CONSEQUENCES IN THE GULF
Crisis in the Strait of Hormuz: What Lies Ahead?
Gawdat Bahgat—free to read!
GCC-Asia Pacific Energy Nexus: Navigating Shifts in Demand and Geopolitics
Umud Shokri—open access!
Outwardly Strong, Internally Brittle: Dissecting the MBS Regime
Mohammed Ayoob—free to read!
POLITICAL CONVULSIONS OVER PALESTINE
New Political Actors in Palestine: The Digital Efficacy of Gen Z
Abdalraheem S.H. Shobaki | Mahmoud S.H. Shobaki
Between Fatigue and Fear: West Bank Student Solidarity During the Gaza War
Mert Öztürk / Oqab Jabali
Explaining Saudi Arabia’s Inaction During the Gaza War: Why No Oil Embargo?
Mazaher Koruzhde | Eric Lob—free to read!
From Palestine Ally to Zionist Partner: India-Israel Relations, 2014–2025
Yücel Bulut—open access!
REBUILDING AND RECKONING IN SYRIA
A Heuristic Equation of Transformation, Justice, and Violence in Post-Assad Syria
Zeynep Banu Dalaman—free to read!
Federalism in Post-Assad Syria: Toward Durable Peace in a Pluralist Society
Dilan Okcuoglu—open access!
REGIONAL SOCIAL & ECONOMIC GOVERNANCE
Cryptocurrency Regulation in MENA: From Prohibition to Conditional Legalization
Bassant Hassib | Fatimah Ayad
Fallen Cedar: Lebanon’s Debt Diplomacy, 2015–2020
Kevin Rosier
Plastics Pollution in the Gulf Countries: Problems and Policy Solutions
Richard Rutter et al.
Constructing Social Cohesion in Qatar: National Vision, Strategy, and Constitution
Logan Cochrane et al.
THE ATTRACTIVE POWER OF EAST ASIA
Saudi Arabia’s Deepening Engagement with Asia-Pacific Nations
Ghulam Ali
China’s Hajj-Related Infrastructure Diplomacy with Saudi Arabia
Song Niu | Danyu Wang
Chinese-Arab Scientific Cooperation and Effectiveness
Minglian Long, Yijia Luo, Yi Zhang
BOOK REVIEWS
Lynch, America’s Middle East
Reviewed by Yasir Kuoti
Denoeux, Springborg, and Alaoui, Making Aid Work
Reviewed by Naomi Sakr
Momeni, The Presidential Difference and Iran’s Foreign Policy Under Khatami from 1997 to 2005
Reviewed by Mahmood Monshipouri
Bajoghli et al., How Sanctions Work
Reviewed by Bahram P. Kalviri
Donelli, Power Competition in the Red Sea
Reviewed by Riccardo Gasco
Brownlee and Ghiabi, States Without People
Reviewed by İlhan Bilici
Karam, The Middle East in 1958
Reviewed by Elifnur Düzsöz
Uysal, Class, Capital, State, and Late Development
Reviewed by Yusuf Murteza
Greenberg, The Long War of Ideas
Reviewed by A.R. Joyce