President Trump’s effort to squeeze Iran into submission will depend heavily on curbing one of the country’s biggest economic lifelines: Dubai.
The United Arab Emirates said late Tuesday that it has suspended financial and economic transactions with Iran, potentially threatening Tehran’s access to a major source of imports and a financial back door to the world.
The move follows weeks of Trump administration cajoling of the U.A.E. to crack down on Iranian financial networks operating in the country, telling Emirati officials that targeting money flows linked to Iran’s Islamic Revolutionary Guard Corps could have a greater impact on Tehran than the U.S. naval blockade of Iranian ports, according to people familiar with the matter.
The U.S. has also urged the U.A.E. during the war to take tougher action against sanctioned Iranian entities and other networks operating covertly in the Emirates, the people said.
“Today, I am also announcing that ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences,” Trump said on social media late Wednesday. “Oil smuggling, swap lines, cash transfers, exchange houses, ship registries, front companies—It all needs to stop NOW. You know who you are.”
The president didn’t specify which countries he had in mind but said he wants all U.S. allies to stand with him.
If implemented broadly, the U.A.E. step could significantly curb Tehran’s access to foreign currency and global trade networks as the Iranian economy buckles under soaring inflation, sanctions and wartime disruption. The Trump administration hopes that could increase pressure on Iran to strike a deal.
But severing those links will be difficult. Much of the activity is deliberately obscured. U.S. sanctions orders in recent years show that oil revenues, foreign-currency trades and payments for Iranian entities have long moved through shell companies and exchange houses in Dubai, often without an Iranian name appearing on the transaction.
Cutting off Iran would also require Emirati authorities to crack down much more aggressively on opaque financial and trading activity, which could hurt Dubai’s role as a freewheeling global hub for commerce, capital and re-exports.
“When you look at Iranian sanctions evasion and Iran’s ability to earn money from illicit oil sales, Dubai is a major hub for illicit financial flows,” said former U.S. sanctions official Max Meizlish , who is now a research fellow at the Foundation for Defense of Democracies. “The U.A.E. taking action against direct trade and financial activity is important but the reality is that a great deal of indirect activity flows through banks in Dubai supporting Iran’s shadow-banking and illicit-financing operations.”
The U.A.E. action followed weeks of escalating tensions, including what Emirati officials say were Iranian attacks on seven of its ships this month alone. On Tuesday, Iran fired two ballistic missiles toward the U.A.E., triggering the country’s air defenses. The Emirates’ Defense Ministry said the missiles were aimed at maritime traffic and fell into the sea.
The U.A.E. moves to limit dealings with Iran had been planned as part of an effort to deter the Revolutionary Guard’s attacks on its ships.
Emirati officials see the latest measures as part of a gradual escalation rather than a wholesale break with Tehran, the people familiar with the matter said. The U.A.E. is expected to move step by step, beginning with new restrictions on cargo and potentially expanding to a broader crackdown on Iranian-linked entities if the Revolutionary Guard continues its strikes. The approach reflects the U.A.E.’s preference for testing what works while preserving room to adjust.
U.A.E. policymakers worry Washington’s strategy of inflicting deeper economic pain on Iran could hurt the segment of Gulf states’ economies that relies on tourism and trade rather than oil, and eventually provoke further Iranian military retaliation, the people said. Emirati officials also want to keep some channels to Tehran open so they retain a diplomatic option if the Trump administration’s pressure campaign fails, they said.
The U.A.E. didn’t respond to a request for comment. An administration official said the U.S. sanctions and blockade have crippled Iran’s economy and that Trump has more levers to pull.
Earlier in the war, the U.A.E. suspended direct cargo shipping with Iran and launched a broader crackdown on Iranian activity in the country, including canceling visas and shutting schools and clubs.
After engaging in sporadic fighting and warning of major escalation last month, Trump has pivoted toward trying to grind down Iran economically. Treasury Secretary Scott Bessent last week indicated that Washington would slap new restrictions on Iran’s economy in the coming days, in what would be a “one-two punch” along with the U.S. naval blockade of Iranian ports.
To squeeze Iran harder, it needs the U.A.E. to join in. The Emirates sits just across the Persian Gulf and has deep commercial, historical and cultural links with its larger neighbor, even though the two governments have frequently been at odds.
Before the war, the U.A.E. was Iran’s largest source of imports ahead of China, supplying more than 30% of the country’s total—about $21 billion worth—in 2024, according to the World Trade Organization.
The U.A.E. has for years served as a key financial hub for Iranian companies and individuals looking to work around Western sanctions, according to analysts tracking Tehran’s activities and the U.S. Treasury. Iran’s sanctions-evasion network has helped Tehran continue selling oil overseas and channel the proceeds toward weapons programs and allied regional groups, they say.
Iran has set up front companies in the U.A.E. to collect oil payments, settle transactions and obscure where the money originated, according to the Treasury and analysts tracking Tehran’s activities.
In 2024, $9 billion passing through correspondent accounts maintained by U.S. banks appears to have been tied to clandestine Iranian financial activity, according to the Treasury Department. The Treasury said U.A.E.-based firms—mostly in Dubai, which is one of the country’s seven emirates—received 62% of those funds.
Iran has also relied on a shadow fleet of older tankers to transport sanctioned crude while masking the vessels’ movements and ownership structures. Many tankers tied to Iran’s shadow trade are owned or managed by companies based in the U.A.E., according to the Treasury.
The U.A.E. has previously said it adheres to sanctions and has a strong commitment to protect the integrity of the global financial system.
Even with the U.A.E.’s newly announced measures, tackling that parallel financing web would remain a challenge, analysts say.
“It is doable but with limits,” said Eric Alter , the dean of the Anwar Gargash Diplomatic Academy in Abu Dhabi, another of the emirates. The government can shut down official banking and major port traffic, but it “cannot police every local partner, every free-zone or every small-vessel movement across seven emirates with different commercial cultures,” he said.
Write to Summer Said at summer.said@wsj.com , Georgi Kantchev at georgi.kantchev@wsj.com and Robbie Gramer at robbie.gramer@wsj.com
