Kathmandu— The United Arab Emirates announced an indefinite trade embargo on Iran Wednesday, accusing Iranian forces of launching two ballistic missiles toward the country and alleging they targeted maritime traffic; Tehran rejected the accusation, suggesting it was a “false flag operation.” The decision to halt all commercial exchanges comes after the UAE’s Ministry of Defence reported detecting the missiles – one landing outside its territorial waters, the other within – and represents a significant escalation in tensions between the two nations amid an ongoing conflict with implications for regional stability. The embargo builds on earlier restrictions and aims to cut off a crucial trade route Iran has relied upon for years.

Escalating Tensions and Alleged Attacks

The UAE’s Ministry of Foreign Affairs stated the embargo was enacted “in light of escalations that undermine peace and security in the region.” According to the Ministry of Defence, its air defenses detected the ballistic missiles launched from Iran on Tuesday. The ministry asserted the missiles were intended to target maritime traffic and vowed to resolutely defend against any threats to national security or navigation. This latest incident follows accusations by Abu Dhabi earlier this year that Tehran attacked two of its state-owned ADNOC vessels in the Strait of Hormuz, for which Iran has not claimed responsibility.

Iranian Denial and Counterclaims

Iran’s Ministry of Foreign Affairs dismissed the UAE's accusation as “baseless.” Spokesman Esmaeil Baghaei proposed the incident was a “false flag operation,” linking it to ongoing conflict involving the United States and Israel. He warned that the claim contradicted principles of good neighborliness, urging regional parties to avoid unfounded accusations against Tehran. Baghaei also argued for consideration of what he termed the “malicious actions” of both the US and Israel when assessing the situation.

Economic Impact of the Embargo

Experts suggest the UAE’s trade embargo could significantly impact Iran's economy, potentially more so than measures imposed by the United States. Mark Kimmitt, a retired US general and former assistant secretary of state, noted that Dubai had become Iran’s most important trading partner, supplying approximately one-third of its imports annually. The UAE previously suspended direct cargo shipping in March but resumed limited trade through Jebel Ali Port in late June. Kimmitt emphasized the importance of financial transactions flowing through Dubai, which has allowed Iran to circumvent international sanctions for years.

Regional Implications and Potential Responses

The embargo follows the expiration of a 60-day window for US-Iranian peace talks without a breakthrough. The UAE’s move could be interpreted by Tehran as an act of war, comparable to the pre-World War II US embargo against Japan, according to Kimmitt. While other Gulf states are expected to adopt a “wait-and-see” approach, the UAE's decision signals a firm stance against perceived Iranian aggression and a willingness to disrupt vital trade routes.

The situation remains tense as regional powers assess the implications of the embargo and await Iran’s response; further escalation or attempts at de-escalation are anticipated in the coming weeks.

(With inputs from Al Jazeera)

Originally published on abcnews.com.np.