UAE takes harder line on Iran as tensions disrupt economy

The United Arab Emirates is adopting a more assertive posture towards Iran, signalling a shift from its traditionally cautious Gulf diplomacy to a more openly strategic approach driven by mounting security and economic challenges.

This recalibration follows a series of missile and drone strikes, along with disruptions to key shipping routes. These events have transformed what was once a manageable geopolitical risk into a direct threat to the UAE’s economic model. Abu Dhabi has made clear that a temporary ceasefire would not suffice unless broader concerns about Iran’s military capabilities and regional role are addressed.T

he position has been clearly articulated by UAE Ambassador to Washington Yousef Al Otaiba, who has emphasised the need for a more comprehensive approach to regional security.

Economic model under pressure

Unlike other Gulf economies that remain heavily reliant on hydrocarbons, the UAE’s growth strategy centres on trade, logistics, finance and tourism. This diversified model makes it particularly vulnerable to instability in maritime routes, especially the Strait of Hormuz, through which a significant share of global oil and liquefied natural gas passes in peacetime.

Recent developments have exposed several immediate vulnerabilities. Disruptions to shipping have caused delays and higher insurance costs, undermining Dubai’s role as a major re-export hub. At the same time, elevated geopolitical risk is affecting investor confidence, with possible consequences for capital flows into real estate and infrastructure. Tourism, another key pillar of the economy, is also beginning to suffer as security concerns dampen short-term travel demand.

Collectively, these pressures are testing Abu Dhabi’s ambition to establish itself as a stable regional business centre — a central element of its long-term post-oil vision.

Deterrence without escalation

The UAE’s sharper rhetoric also serves a clear signalling purpose. By aligning more closely with the United States and, implicitly, with Israel following the Abraham Accords, Abu Dhabi is embedding itself within a broader security framework aimed at containing Iranian influence.

However, analysts highlight structural limitations. The UAE lacks the military weight to decisively shape outcomes in a direct confrontation, so its approach remains calibrated rather than escalatory.

It functions as a warning to Tehran, reassurance for domestic audiences amid regional instability, and a way to strengthen its image as a proactive security partner internationally. This stance has resonated in parts of Washington, especially among hawkish policy circles, though it also risks heightening tensions with Iran.

Balancing confrontation and engagement

Despite the tougher tone, the UAE is unlikely to maintain a purely confrontational stance in the long term.

Economic ties between the UAE and Iran remain substantial. Dubai has long served as a vital commercial gateway for Iranian trade – even during periods of international sanctions. These informal and semi-formal links have proven resilient, highlighting the depth of economic interdependence.

For policymakers in Abu Dhabi, the current crisis underscores a persistent dilemma: while Iran represents a serious security challenge, it also retains the ability to disrupt maritime trade and global energy flows at relatively low cost. Full disengagement is therefore both difficult and economically undesirable.

Looking ahead, several trajectories are emerging for the UAE and the wider Gulf region. One involves greater regionalisation of security efforts, including increased Gulf participation in maritime operations around the Strait of Hormuz. Another focuses on economic hedging through accelerated diversification into sectors less exposed to geographic risks, such as digital services and finance. A third pathway points to selective re-engagement with Iran via quieter diplomatic channels once active hostilities ease, reflecting a pragmatic acknowledgment of shared economic interests.

For the UAE, the goal is not to achieve a decisive outcome in the conflict, but to restore a degree of predictability to its operating environment.

Ukraine ties and disinformation dispute

Against this backdrop, the UAE is also expanding its international partnerships. Ukraine is expected to sign a ten-year cooperation agreement with the Emirates in the coming days, following similar arrangements with Saudi Arabia and Qatar. The deal is set to include joint weapons production and cooperation in the energy sector.

Meanwhile, a claim by Iranian military sources that a warehouse containing Ukrainian anti-drone systems had been struck in Dubai has been firmly rejected by Kyiv. Ukrainian Foreign Ministry spokesperson Heorhii Tykhyi dismissed the report as false, after Iran’s Fars news agency alleged that the facility was linked to assistance for United States forces and belonged to Ukraine.

You can find the full articles of EUalive’s partners LevantIntel and Suspilne here and here.

Caption: A trader works at the Dubai Financial Market in Dubai, United Arab Emirates, 24 March 2026. Dubai’s main index DFMGI increased by more than two percent in morning trading before ending the day up by more than 1.6 percent. Traders remain concerned about the ongoing joint US-Israeli strikes on Iran and Iran’s retaliatory attacks across the region, increasing energy prices and disruption of shipping through the Strait of Hormuz. EPA/ALI HAIDER