The relationship between Iran and the United Arab Emirates has long been one of the most complex and contradictory in the Middle East. It is a relationship woven together by deep economic interests, yet burdened by security suspicions, geopolitical rivalry, and intertwined regional conflicts.
Amid shifting regional power dynamics and alliances, the UAE, particularly Dubai — which served as Iran’s economic lifeline during years of sanctions — has gradually become one of Tehran’s most prominent regional rivals. This was not a sudden transformation, but rather the result of cumulative developments that have reshaped the regional balance of power. These developments include growing polarization, the internationalization of Gulf security, and the UAE’s expanding ties with Western alliances and its rapprochement with Israel.
While political disagreements have been a feature of the relationship between the US and Israel for decades, the recent war on Iran has pushed the relationship into an unprecedented phase of escalation and open hostility.
The era of pragmatic coexistence
From the 1990s through the early 2010s, Dubai became Iran’s most important financial and commercial hub in the region. Thousands of Iranian companies operated within the UAE, while a significant portion of Iran’s imports passed through Emirati ports.
For Iran, the UAE served as a gateway to the global economy, a channel to circumvent banking restrictions and sanctions, and a logistical hub for re-exports and regional trade.
The UAE, in turn, benefited from the influx of Iranian investments and capital, the revitalization of its re-export sector, the expansion of the Iranian market, and the strengthening of its position as a major commercial hub in the Gulf.
Throughout this period, economic interests remained strong enough to mitigate political tensions. Mutual commercial interests prevented the relationship from sliding into direct confrontation, even after diplomatic relations between the two countries deteriorated following 2016.
Estimates indicate that the UAE accounted for roughly 80% of trade between Iran and the Gulf states. Trade between the two countries peaked in 2011 at approximately $23 billion before gradually declining under the impact of Western and US sanctions.
Dubai as Iran's Economic Gateway
Dubai alone represented nearly 90% of this trade, according to older figures from Iran’s Ministry of Economy. Iranian investments in the UAE were estimated at between $200 billion and $300 billion, making them second only to US investments, according to estimates by the Iranian Business Council (IBC) in Dubai.
The substantial economic presence of the Iranian expatriate community reinforced the UAE’s interest in maintaining stable relations with Tehran. Reflecting this pragmatic approach, Dubai’s ruler, Sheikh Mohammed bin Rashid Al Maktoum, described Iran in a 2014 television interview as a “neighboring country” and argued that any understanding between Tehran and Washington, including the lifting of sanctions, “would benefit everyone.”
Even before the outbreak of the 2026 war, the UAE remained Iran’s second-largest trading partner after China. Emirati exports to Iran ranged between $22 billion and $25 billion annually, including mobile phones, computers, consumer goods, and intermediate products, while Iran’s non-oil imports from the UAE reached nearly $20 billion in some years. Iran, in turn, exported food products, petrochemicals, fuel, and agricultural goods to the UAE. Despite the UAE’s normalization agreements with Israel, its economic relations with Iran did not decline; on the contrary, they continued to grow significantly.
The Iran-Emirates Chamber of Commerce warned against politicizing economic relations with Abu Dhabi following the Abraham Accords, stressing that, under sanctions, Iran has few alternative trade options and that the UAE is the primary channel for its non-oil trade and for circumventing economic restrictions.
However, the war in 2026 marked a decisive turning point in the relationship between Tehran and Abu Dhabi. The conflict eroded mutual trust and intensified political and security tensions, damaging economic ties and prompting Tehran to strengthen ties with Oman and Pakistan to reduce its dependence on the UAE as a key economic gateway.
Sources of Strategic Rivalry
Relations between Tehran and Abu Dhabi were never built on complete trust. Instead, they remained governed by a historical legacy of territorial disputes, an escalating struggle for regional influence, and profound differences in their visions for regional security and its political and military arrangements.
The dispute over the three islands of Abu Musa, Greater Tunb, and Lesser Tunb, constitutes the cornerstone of the historical conflict between Iran and the UAE. Although the issue remained politically contained for many years, it continued to be a constant source of mistrust and, in recent years, has re-emerged as a highly sensitive security and sovereignty issue.
Iran maintains that its sovereignty over the islands dates back to ancient historical eras, extending through successive Elamite and Persian periods.
The UAE, meanwhile, argues that the islands were historically governed by Arab rulers and that Iran’s control over them following the British withdrawal in 1971 constitutes an “occupation” that should be resolved. Following Britain’s withdrawal from the Gulf at the end of 1971, Iran under Shah Mohammad Reza Pahlavi moved to establish control over the islands.
However, from the early 1990s onward, the issue returned to the forefront with greater intensity, particularly after Iran strengthened its military presence on Abu Musa and imposed regulations on foreign entry to the island — measures the UAE viewed as a unilateral change to the status quo. Since then, the islands dispute has become a permanent source of conflict.
Over time, the dispute over the three islands became a symbol of the sovereignty conflict between the two countries and a constant obstacle to any real progress in political relations. Between 2023 and 2026, tensions over the islands resurfaced once again, alongside Iranian military exercises in the Gulf and exchanges of statements between Tehran and the Gulf Cooperation Council (GCC) states.
Beyond the territorial dispute, regional transformations played a crucial role in widening the gap between Iran and the UAE. Since the Iran-Iraq War of the 1980s, clear differences had emerged in the security calculations of the two sides. Although the UAE officially maintained neutrality during the war, Abu Dhabi provided Iraq with political and financial support, while Dubai and Sharjah preserved extensive commercial ties with Iran.
Regional Competition and Security Divergence
The most significant shift came after the 2003 U.S. invasion of Iraq and the fall of Saddam Hussein’s regime. Gulf states, led by the UAE and Saudi Arabia, viewed Iran’s regional influence as expanding at an unprecedented rate, whether in Iraq or later in Syria, Lebanon, and Yemen.
With the outbreak of the Arab Spring in 2011, Iranian-Emirati relations entered a more tense phase. Abu Dhabi, particularly following the rise of Sheikh Mohammed bin Zayed, adopted a more interventionist and ambitious foreign policy aimed at countering the rise of Islamist movements, especially the Muslim Brotherhood, containing Iranian and Turkish influence in the region, and cementing the UAE’s role as an influential regional power.
Within this context, the UAE supported the Arab coalition in Yemen and became involved in the conflicts in Libya, Syria, and Egypt, while Iran accused Abu Dhabi of engaging in projects designed to reshape regional balances of power against it.
For its part, the UAE accused Tehran of supporting sectarian militias and interfering in Arab affairs. The war in Yemen became one of the most prominent arenas of indirect confrontation between the two countries, as the UAE viewed the growing influence of the Iranian-backed Houthis as a direct threat to Gulf security and strategic maritime routes.
Relations between Iran and the Emirates were also influenced by the nature of ties between Tehran and Riyadh, given the strategic alliance between Saudi Arabia and the UAE. As Saudi-Iranian tensions escalated, particularly after the attack on Saudi diplomatic missions in Iran in 2016, the UAE adopted a hardline stance towards Tehran and reduced the level of its diplomatic representation there. Abu Dhabi moved closer to the broader Gulf perspective that views Iran as the region’s primary security threat, even as it later attempted to pursue a more pragmatic approach to ease tensions and protect its economic interests.
The UAE’s signing of normalization agreements with Israel in 2020 also marked a pivotal turning point in its relations with Iran. From Tehran’s perspective, this was not merely a diplomatic normalization process but a strategic move that enabled Israel to enter the Gulf’s security architecture and opened the door to intelligence, military, and technological cooperation near Iran’s borders.
From that moment onward, Iran began to view the UAE not only as an economic partner or regional rival, but also as part of a regional and international network aimed at containing Iranian influence. The growing exchanges and visits between Israeli and Emirati officials, along with expanding security and military cooperation between the two sides, heightened concerns in Tehran, particularly amid reports of joint military exercises, intelligence cooperation, and partnerships in defense and security technology. Iranian officials responded with a series of stern warnings, emphasizing that any use of Emirati territory or airspace in operations targeting Iran would be considered a crossing of red lines and could lead to direct confrontation.
On the international level, the United States played a central role in deepening the rift between Iran and the UAE. While Tehran has consistently called for the withdrawal of US forces from the Gulf, Abu Dhabi views the American military presence as a fundamental security guarantee against regional threats.
The UAE hosts several major US military bases, most notably Al Dhafra Air Base, which serves as one of the key hubs of US military deployment in the region. Abu Dhabi also supported the “maximum pressure” policy campaign adopted by US President Donald Trump during his first term against Iran.
Emirati leaders view Iran’s nuclear program, even in the absence of a nuclear weapon, as a long-term strategic threat to Gulf security. Consequently, the UAE has supported US efforts aimed at containing Iran politically, economically, and militarily.
Despite these disagreements, the UAE has in recent years sought to maintain a delicate balance between escalation and de-escalation with Iran.
However, the persistence of regional tensions, the expansion of Emirati-Israeli cooperation, and the increasing militarization of the Gulf have made the relationship between the two countries more fragile than ever before.
The 2026 War: A Strategic Turning Point
Days before the outbreak of the war in 2026, Abu Dhabi sought to reaffirm its commitment to a policy of neutrality. The UAE Ministry of Foreign Affairs announced that the country’s territory, airspace, and territorial waters would not be used in any military attack against Iran, stressing that de-escalation and dialogue were the only path to avoiding a regional catastrophe.
Reports issued by the US Congress in January 2026 indicated that Abu Dhabi was deeply concerned about a major regional escalation that could threaten Gulf security and the global economy, particularly since the UAE is among the countries most vulnerable to any Iranian retaliation due to its geographic location and its hosting of US military infrastructure.
In this context, the Emirates Policy Center published an assessment stating that any military confrontation with Iran would require Washington to carefully consider possible Iranian responses, including attacks on US bases, as well as evaluate Tehran’s willingness to expand the scope of the conflict.
Yet this policy of “cautious neutrality” quickly collapsed as military operations expanded. With the commencement of US and Israeli strikes against Iran, Tehran perceived that the use of Gulf bases, facilities, installations, and logistical infrastructure effectively drew some Gulf states, foremost among them the UAE, into the circle of confrontation.
From that moment, a genuine transformation began in the Iranian perception of Abu Dhabi.
The End of Neutrality
The UAE soon became a direct target of Iranian attacks. It was the Gulf state most heavily exposed to Iranian attacks, having been targeted by more than 400 ballistic missiles, over 2,000 drones, and 19 cruise missiles.
As the strikes intensified, the UAE closed its embassy in Tehran on March 1, 2026, and withdrew its diplomatic mission entirely, while Iran accused Abu Dhabi of actively participating in the aggression against it. The UAE also adopted the most hardline stance among the Gulf Cooperation Council (GCC) states, working to deepen its security partnerships with the United States and Israel, arguing that its previous policy of engagement with Iran was no longer viable under the current escalation and that abandoning the normalization process, including the Abraham Accords, was no longer a practical option.
Amid the war, Abu Dhabi expressed its readiness to participate in any military effort aimed at degrading Iranian capabilities, particularly with regard to maritime security in the Strait of Hormuz. In this context, the UAE ambassador to Washington, Yousef Al Otaiba, called for a firmer approach toward Iran, stressing the need to completely eliminate “missile and drone threats”.
Similarly, Anwar Gargash, the UAE president's diplomatic advisor, stated that his country “does not want war, but will emerge victorious from it”, calling for long-term guarantees to curb all forms of Iranian threats.
In a new development, Iran moved to alter the geographical scope of the Strait of Hormuz, defining the areas of control and management of the strait as extending “from a line connecting Jabal Mubarak in Iran and southern Fujairah in the UAE at the eastern end of the strait, to the line connecting the end of Qeshm Island in Iran and Umm Al Quwain in the UAE at its western end.”
The discourse towards the UAE shifted. Iranian MP Ali Khazarian describing the UAE as “a hostile base for the enemy” and indicating that Tehran's military doctrine would treat it accordingly.
As the war continued, the rhetoric on both sides hardened. Iranian officials increasingly portrayed the UAE as part of an aggressive regional alliance aligning with Israel, while Abu Dhabi condemned the “blatant” attacks as endangering civilian security and regional stability.
The name of the UAE ambassador to Washington, Yousef Al Otaiba, also returned prominently to the forefront during the war, particularly after old leaks resurfaced, revealing the extent of coordination between Abu Dhabi, and American and Israeli figures and research centers on matters related to confronting Iran.
The controversy intensified after Al Otaiba published an article in The Wall Street Journal titled “The UAE Stands Up to Iran,” in which he called for a "conclusive outcome” that would address Iran’s entire threat apparatus, including its nuclear program, missile capabilities, and drone arsenal.
The Limits of the Hedging Strategy
The war clearly showed that the UAE’s long-standing “hedging” policy had reached its limits. This policy was based on balancing security partnerships with the United States and Israel, while also maintaining economic ties with Iran. However, the war revealed that such a balance was no longer possible amid sharp regional polarisation. From Tehran’s perspective, there was no longer any room for what it terms 'grey neutrality', and the UAE was treated as part of the camp hostile to Iran rather than as a Gulf state merely seeking to protect its interests like the others.
Conversely, Abu Dhabi emerged from the war with a different conclusion: that economic openness toward Iran is no longer sufficient to guarantee security, and that the future of the Gulf is increasingly tied to security alliances with the United States and Israel. As a result, Iranian-Emirati relations entered a new phase in which economic priorities have receded in favor of security and military considerations.
In conclusion, the 2026 war brought an entire era of “pragmatic coexistence” between Iran and the UAE to an end and ushered in a new phase dominated by security and strategic considerations. Although both sides understand the enormous cost of a full-scale war, the restoration of trust between them appears unlikely in the foreseeable future, and the relationship will remain characterized by caution and geopolitical rivalry for years to come.
This report was published in collaboration with Raseef22.