The UAE has announced it is suspending all trade and financial ties with Iran following a spate of Iranian attacks against Gulf shipping, including UAE-linked vessels.
Afra Al Hameli, director of the Strategic Communications Department at the UAE's foreign ministry, said that "in light of escalations… all trade, commercial exchanges, and financial transactions with Iran have been halted until further notice".
The UAE on Tuesday accused Iran of firing two ballistic missiles targeting maritime traffic, saying both fell into the sea. Tehran rejected the allegation as "baseless".
The UAE is one of Iran's most important regional economic partners, with Dubai in particular serving as a critical commercial and financial link for Tehran. Iran has long relied on trade through the UAE to help navigate sweeping US sanctions that have battered its economy and contributed to high inflation and a weakened currency.
Higher energy prices during the war have, however, boosted Iran's oil revenues. Fars news agency reported last month that the country earned $7.5 billion from oil exports in the first four months of the current Iranian year, around 1.5 times the amount recorded over the same period a year earlier.
The UAE bore the brunt of Iran's attacks on US-allied Gulf states during the early months of its retaliation for US-Israeli strikes on Iran, with the country targeted by thousands of missiles and drones.
UAE officials have said more than 3,000 missiles and drones were directed at the country during the conflict.
According to ACLED, the UAE was also the Gulf state most exposed to Iranian attacks on non-military infrastructure between 28 February and 30 July, accounting for 28% of the 172 such attacks recorded across the six GCC states. Targets included energy facilities, ports, airports and other commercial infrastructure.
Direct attacks on UAE territory had largely ceased during the period of de-escalation that preceded the latest missile incident, with the last reported strike on UAE soil taking place on 4 May at Fujairah port. Attacks on UAE-linked shipping, however, continued.
The easing in tensions followed the signing of a 60-day memorandum of understanding between the US and Iran in June, intended to pave the way for further negotiations, including on Iran's nuclear programme and navigation through the Strait of Hormuz.
With the 60-day window expiring this week without a breakthrough, the conflict remains in limbo, with attacks on shipping and increasingly escalatory rhetoric continuing.
On Wednesday, Ali Abdollahi, chief of staff of Iran's armed forces, warned Gulf states that "any assistance or facilitation provided to the aggressor US military amounts to participation in the US military operation".
He added that Iran was closely monitoring the large number of military aircraft, particularly refuelling planes, stationed at bases across the Gulf, warning host countries that "nothing is hidden from our eyes".
Attacks on international shipping through and around the Strait of Hormuz have continued despite periods of de-escalation.
Alongside the military's warnings, Iran is reportedly weighing new options to widen the conflict if the United States escalates its attacks.
Iranian forces have assessed the possibility of striking US military assets in Bulgaria, including Bezmer air base, which has been approved for use by US refuelling aircraft, according to the Financial Times. Cyprus, where Britain's RAF Akrotiri base was struck by an Iranian-made drone in March, has also been discussed as a potential target.
The FT also reported that Iranian forces have examined the possibility of targeting subsea fibre-optic cables in the Strait of Hormuz if the conflict escalates.
Iran has previously threatened British military facilities over their use by US forces. In March, Tehran launched two ballistic missiles towards the joint US-UK military base at Diego Garcia in the Indian Ocean, although neither struck the base. One missile failed in flight and the other was intercepted, according to US officials.
The Wall Street Journal has separately reported that Iran prepared a broader escalation strategy involving allied groups in Iraq and Yemen, as well as potential sabotage and ground operations, while continuing negotiations with Washington.
The escalation planning comes amid Trump's repeated threats to destroy large parts of Iran's energy infrastructure.