Oil, gas and Iran economic analyst
The war pitting the United States and Israel against Iran is being fought across airspace and shipping lanes, but one of its most consequential economic effects may be unfolding elsewhere: the fragile commercial relationship between Tehran and the United Arab Emirates.
A series of recent economic measures taken by the UAE following Iranian attacks on Emirati infrastructure has exposed how deeply Iran’s external trade depends on Dubai’s role as a financial and logistical gateway.
The steps—ranging from restrictions on Iranian nationals to disruptions in financial and trade channels—highlight both the extent of interdependence between the two economies and the vulnerabilities that accompany it.
Iran’s consulate in Dubai confirmed that more than 1,200 Iranians were repatriated through indirect routes via Armenia and Afghanistan after direct travel links were suspended.
More consequential than these immediate measures, however, is the disruption of bilateral trade flows. The UAE is Iran’s second-largest trading partner after China and serves as a critical gateway for imports.
No container ships have been seen crossing from Emirati ports to Iran since the start of the conflict, according to Rebecca Gerdes, an analyst at data company Kpler.
According to official data, Emirati exports to Iran rose from about $5.2 billion in 2018—when the United States withdrew from the nuclear deal—to roughly $23 billion in recent years, accounting for more than one-third of Iran’s total imports.
Iran’s non-oil exports to the UAE have also grown, rising from $5.7 billion to nearly $8 billion.
Data from Kpler, seen by Iran International, indicates that Iran exports about 160,000 barrels per day of fuel oil (mazut) to the UAE, along with smaller volumes of other petroleum products such as LPG.
Services trade constitutes another vital channel. Iran imports roughly $23 billion in services annually—including logistics, engineering, insurance and trade facilitation—of which the UAE accounts for about 22 percent.
A substantial portion of this economic relationship also operates outside formal channels. Iran is estimated to import more than $20 billion worth of smuggled goods each year, much of it routed through the UAE.
Dubai has also served as a key node for currency exchange networks, document falsification related to oil shipments and other mechanisms used to circumvent international sanctions. Iranian exchange houses have played a central role in facilitating these activities.
Recent reports suggest that dozens of exchange operators with alleged links to Iran’s Islamic Revolutionary Guard Corps have been detained in the UAE as tensions escalated. While the full scope of these actions remains unclear, they point to a broader effort by Emirati authorities to tighten enforcement and limit illicit financial flows.
Iran’s recent military actions have targeted multiple locations in the UAE, including Fujairah—the country’s only oil export terminal outside the Strait of Hormuz—raising concerns about energy security and trade continuity.
A recent Goldman Sachs report warned that a prolonged closure of the Strait of Hormuz could reduce the UAE’s GDP by as much as 6 percent in April alone, underscoring the broader regional economic risks posed by the conflict.
Yet the same dynamics also expose Iran’s vulnerabilities. The UAE’s role as a commercial, financial and logistical hub makes it difficult to replace in the short term.
Few countries possess the infrastructure, geographic proximity and established trade networks required to replicate Dubai’s function in Iran’s economic ecosystem.
Whether the UAE’s response becomes a decisive pressure point for Iran will depend on both the duration and the breadth of the restrictions.
In the short term, disruptions to trade, finance and logistics are likely to raise costs and complicate supply chains for Iranian importers. Over the longer term, sustained constraints could push Tehran to diversify routes and partners, though replacing the UAE’s role would be neither quick nor straightforward.
For now, the trajectory of tensions suggests that friction with the UAE may emerge as one of the most consequential external challenges to Iran’s trade architecture long after the current conflict subsides.
Sources familiar with the matter told Iran International that UAE authorities detained dozens of money changers tied to financial entities linked to Iran’s Revolutionary Guards, shut down associated companies and closed their offices.
The crackdown follows days of mounting regional tensions and comes after other measures targeting Iranian nationals, including visa revocations and tighter travel restrictions through Dubai.
For years, Dubai has served as Iran’s main offshore financial artery, where oil proceeds, petrochemical revenues and rial conversions were turned into dollars, dirhams and euros beyond the reach of the country’s battered domestic banking system.
“This is going to be a real problem for Tehran because Dubai was an economic lung for the Iranian regime,” Jason Brodsky of United Against Nuclear Iran told Iran International.
“That is economic pressure and diplomatic isolation in a way that the UAE is able to employ against the Iranian regime, and it will have a very considerable impact.”
'Most critical hub'
According to Miad Maleki, a former senior US Treasury sanctions strategist and now a senior fellow at FDD, the UAE is not just one sanctions-evasion hub among many.
“The UAE is the single most critical jurisdiction in the Iranian regime’s sanctions-evasion architecture,” Maleki said.
Dubai’s exchange houses have long given the IRGC and the Quds Force access to the hard currency needed to finance proxy groups including Hezbollah, Hamas, the Houthis and militias in Iraq.
The detention of trusted IRGC-linked money changers threatens networks that took years to build.
“These trust-based sarraf (money changer) relationships, bank accounts and corporate structures are not quickly replaceable,” Maleki said.
He added that even exchange houses untouched by the crackdown were now likely to think twice before processing Iran-linked transactions, sharply raising both the cost and the risk of doing business with the Guards.
The pressure comes as Iran’s domestic economy is already under severe strain.
Foreign reserves, once estimated at around $120 billion in 2018, had fallen below $9 billion by 2020, leaving Iran increasingly reliant on offshore currency channels.
Dubai as ‘washing machine’
Mohammad Machine-Chian, a senior economic journalist at Iran International, said the UAE remains Iran’s most important economic conduit after China.
“The UAE is Iran’s most critical economic lifeline after China,” he said.
He said Dubai’s free zones host hundreds of Iranian-linked shell companies used to mask oil and petrochemical sales, launder proceeds and channel hard currency back to Tehran.
Bilateral trade has hovered between $16 billion and $28 billion in recent years, with Iranian non-oil exports alone reaching roughly $6 billion to $7 billion annually, according to Machine-Chian.
A sustained crackdown could cost Tehran tens of billions of dollars in revenue streams while severing what he described as Iran’s “USD cash lifeline.”
Dubai has also functioned as a transit point for illicit Iranian funds moving onward to North America, including transfers routed to the United States and Canada through correspondent banking and hawala networks.
As Maleki put it, “Dubai is the washing machine: Iranian oil proceeds and rial conversions go in, sanitized dirham and dollar transactions come out.”
From diplomacy to backlash
Beyond the financial damage, analysts say the crackdown reflects a broader political rupture between Tehran and the Persian Gulf states.
Brodsky said Iran’s attacks on neighboring countries had transformed the strategic environment in the region.
“The relationship between Iran and the GCC countries is not going to go back to the way it was before Operation Epic Fury,” he said.
Where Persian Gulf states had once pushed for diplomacy, Iran’s retaliation has instead driven them closer to Washington and Israel.
For years, Tehran sought to encircle Israel in what it called a “ring of fire” through regional proxies.
Now, Brodsky said, the Islamic Republic has reversed that dynamic.
“They wanted to encircle Israel in a ring of fire,” he said. “Now they are basically encircling themselves in a ring of fire because they’ve been angering their neighbors with all of their attacks.”
He said that reversal could carry long-term consequences, including deeper Persian Gulf-Israel security coordination and new openings for the Abraham Accords.
“The missile threat and drone threat have become paramount in this conflict,” Brodsky said. “That could drive these countries even closer to the US and Israel.”
'Collapse within weeks'
The UAE crackdown comes as signs of mounting economic distress are mounting inside Iran.
Sources previously told Iran International that President Masoud Pezeshkian had warned senior officials that without a ceasefire, the economy could face collapse within weeks.
Across major cities, ATMs have been running short of cash, banking services have faced intermittent disruptions and government workers have reported months of delayed salary payments.
With inflation in essential goods already above 100 percent before the war, the loss of Dubai’s financial channels could deepen the regime’s crisis.
For Tehran, the arrests in the UAE are more than a financial disruption.
They may signal that one of Iran’s most dependable external pressure valves is starting to close.
Jafari, a fifth-grade student, was killed at a military checkpoint in Tehran during US and Israeli airstrikes targeting military sites, according to Hengaw, a Norway-based Kurdish human rights organization that monitors abuses in Iran.
In an interview with the state-affiliated Hamshahri newspaper, the boy’s mother said that because of a “shortage of personnel,” his father had taken him to the checkpoint. He was later killed in a drone strike while stationed there.
The Basij Organization confirmed that the 11-year-old died “while on duty” at a checkpoint on Artesh Highway as a result of the strike.
Why he was sent remains difficult to verify. In Iran’s tightly controlled information environment, families often speak under pressure, with state scrutiny and the threat of reprisals limiting candor.
The case comes as officials with the Islamic Revolutionary Guard Corps have openly acknowledged lowering the minimum age for war-related support roles to 12.
Rahim Nadali, a cultural official with the Guards in Tehran, said in remarks aired on state media that an initiative called For Iran was recruiting participants for patrols, checkpoints and logistics.
“Given that the age of those coming forward has dropped and they are asking to take part, we lowered the minimum age to 12,” he said, adding that 12- and 13-year-olds could now take part if they wished.
The state-backed recruitment drive makes Jafari’s death more than an isolated case. Together with precedent from the Iran-Iraq war, it suggests children even younger than the officially stated minimum may also be drawn into the war effort.
For rights advocates, the case reveals both a propaganda strategy and a manpower crisis inside a weakened state.
“They want to recruit these young people, use them as a kind of human shield. Because if they attack these kids, they start saying, ‘Oh look, they attack kids,’ and that’s what they’re doing,” said Shiva Mahbobi, a former political prisoner and London-based human rights advocate.
The child was placed at a military checkpoint even as the regime knew such sites were active targets of Israeli strikes, underscoring the degree to which minors were knowingly exposed to lethal risk.
Analysts say the reliance on minors also points to deeper strain within the regime’s security structure. After months of domestic unrest, wartime losses and reported cracks within some IRGC ranks, including defections, the state appears increasingly short on trusted personnel for checkpoint and support roles.
“They have actually called upon younger people to come and tried to recruit them. It shows they are preparing for a battle where they know they will need many more forces,” Mahmood Amiry-Moghaddam of the Norway-based Iran Human Rights organization told Iran International.
“It also shows they are not in a good condition. They are struggling for their survival.”
“They have only one principle, which is holy to them, and that’s to preserve the establishment," he added.
Through his human rights organization, Amiry-Moghaddam has documented cases from the January crackdown in which the regime placed weapons in the hands of minors and sent them to fire on protesters, exploiting the hesitation many civilians feel when confronted by a child.
A holy pledge: preserve the regime
The use of children in conflict, rights groups say, is not new. It reflects a longer doctrine in which vulnerable lives are used to offset military weakness and preserve the state.
“The Islamic Republic used a large number of child soldiers during the war with Iraq. They also sent Afghan children to fight in Syria,” said Shahin Milani, executive director of the Iran Human Rights Documentation Center.
“Given the pressure they are under, it is not surprising that they have resorted to using minors to man checkpoints. Perhaps they want to keep their trained fighters for more critical roles. Since it came to power in 1979, the Islamic Republic has relied on sacrificing its soldiers to compensate for technological inferiority.”
That logic, rights defenders argue, crosses from military expediency into deliberate political calculation.
“Hiding behind children is not new. The Islamic Republic used children in the war with Iraq as well, brainwashing them with propaganda and giving them keys to heaven," said Roya Boroumand, co-founder and executive director of the Abdorrahman Boroumand Center.
The move comes despite Iran’s obligations under the Convention on the Rights of the Child, which prohibits the use of children in military activities. Iran signed the treaty on September 5, 1991 and ratified it on July 13, 1994.
For Boroumand, the use of minors reflects a governing doctrine in which human life is subordinated to state survival.
“They are disposable and instruments for a higher purpose. In this case, the loss of children’s lives increases the political cost of war for their enemies. So rather than protecting and evacuating them to safe shelters, they deliberately expose them to danger,” she said.
So far, UNICEF has not publicly condemned the Islamic Republic’s stated policy of recruiting children into war-related support roles. Iran International has reached out to UNICEF’s communications team for comment.
