The Gulf states find themselves under increasing pressure as the US-Iran confrontation enters a new phase. On Monday, Washington launched a campaign aimed at isolating Tehran economically, threatening countries and companies that maintain transactions with Iran with severe sanctions. This shift in strategy redirects the confrontation from direct US-Iran relations to other nations and financial hubs, notably Gulf states that Iran uses as conduits to access global markets.
In the wake of the US Treasury’s announcement detailing the sanctions, the United Arab Emirates (UAE) has taken the most decisive stance among Gulf countries. Just days prior, Abu Dhabi abruptly announced the cessation of all commercial and financial dealings with Iran, signalling a clear alignment with Washington’s objectives.
However, the remaining Gulf Cooperation Council (GCC) countries have not yet articulated specific positions, suggesting that the intertwined issues of trade, energy, mediation, and the security of the Strait of Hormuz complicate their responses.
Escalating Economic Pressure
The US Treasury’s details regarding the “economic isolation” campaign reveal a significant escalation of efforts to “cut off Iran’s financial lifeline” and compel it to choose between global isolation or reintegration into the world economy. Washington is targeting Iran’s “shadow fleet” and oil smuggling networks, including intermediaries, shipping companies, and financial agents involved in transporting Iranian crude and petroleum products.
Political analyst Ahmed Khazaei stated that these sanctions would directly impact economic relations between the Gulf states and Iran, as they increase the legal and financial risks associated with any dealings with Iranian institutions. Gulf companies benefitting from the Iranian market now face threats of significant losses or loss of access to the international banking system due to the latest sanctions.
The Treasury has revealed that its efforts focus on networks operating through the UAE, China, Hong Kong, Singapore, Switzerland, and Europe, alleging these networks assist in transferring Iranian oil revenues to the Revolutionary Guard and Quds Force, which are designated as terrorist entities by the US.
Mixed Responses Among Gulf States
The positions of the Gulf states regarding the sanctions vary based on their complex calculations about relations with Iran and their ties to Washington. The UAE is taking the lead in calling for heightened pressure on Tehran following a series of ballistic and drone attacks targeting its territory.
In response to escalating Iranian aggression and maritime security threats, the UAE has declared a halt to all activities and financial exchanges with Iran until further notice. This decision has implications that extend beyond the bilateral relationship, given Dubai’s historical role as a major hub for Iranian trade.
Following the announcement of US sanctions, Anwar Gargash, the diplomatic advisor to the UAE President, noted that the confrontation has entered a new phase characterised by intensified economic pressure and a move to end efforts to dominate the Strait of Hormuz, moving beyond a mere memorandum of understanding. He asserted that Iranian attacks on Gulf countries had miscalculated their intent, deepening Tehran’s predicament and exacerbating its isolation.
While Gargash’s statements reflect a clear and firm stance from the UAE, they do not represent a collective Gulf Cooperation Council position, as there was no immediate endorsement or joint statement from Saudi Arabia, Qatar, Oman, Kuwait, or Bahrain.
Economic Interdependence
According to World Trade Organization data, around 30% of Iran’s imports, valued at approximately $21 billion, come from the UAE. Additionally, about 13% of Iran’s exports, equating to around $7 billion, flow into the UAE market. For Iran, the implications are significant; Dubai has historically served as a crucial re-export hub for goods ranging from electronics and equipment to consumer goods and agricultural products.
Despite ongoing political disagreements, both nations have attempted to expand their economic ties in recent years. The joint economic committee met for the first time in a decade in 2024 to discuss trade, investment, and logistics. While the UAE has complied with US and international sanctions against Iranian entities and sectors, the recent halt in financial dealings marks a shift in this dynamic.
According to Abdullah Ba’aboud, an academic specializing in international relations, the UAE’s decision to terminate commercial dealings with Tehran cannot solely be seen as a response to US pressure. He points out that the Iranian missile threats against UAE shipping have changed Abu Dhabi’s calculus, making the continuation of dealings with Tehran contingent upon security risk assessments rather than merely economic benefits.
Oman’s Strategic Position
The case of Oman holds particular significance, given its political and trade relations with Tehran and its role as a mediator in the current conflict. In May 2025, Muscat and Tehran entered a preferential trade agreement, with bilateral trade reaching around 512 million Omani rials (approximately $1.33 billion) in 2024, a 52% increase from the previous year. Oman became the second-largest destination for re-exports after the UAE, underscoring the complexity of its economic ties with Iran.
Nonetheless, Oman’s relationship with Iran presents a strategic dilemma. While it desires to maintain ties with Washington and adhere to the international financial system, Oman is unlikely to support a complete political and economic isolation of Iran, as such a stance would not serve its national security interests. Ba’aboud notes that Oman’s security relies on balancing relationships, given its geographical position and regional dynamics.
Geopolitical Calculations
Saudi Arabia resumed diplomatic ties with Iran in 2023 under Chinese auspices; however, trade and investment remain relatively limited compared to Oman and the UAE’s prior engagements. The Saudi economy possesses greater capacity for flexibility, allowing for varied oil export routes that do not solely rely on the Strait of Hormuz, a distinct advantage not shared by its Gulf counterparts.
While Riyadh seeks to maintain its independence in decision-making and dialogue with Tehran, its strategic relationships with the US remain significantly more extensive than those with Iran; hence, substantial economic engagement with Tehran appears unlikely amidst cautious diplomacy.
Qatar’s relations with Iran revolve around a shared gas field, but its commercial and financial ties remain smaller than those between Oman and Iran. Doha has taken on a mediating role since the onset of the crisis. A spokesperson for the Qatari foreign ministry described the new US sanctions on Iran as “unilateral,” affirming Qatar’s commitment to mediation efforts in resolving the conflict.
Kuwait maintains limited trade ties framed by safety and political considerations, while Bahrain is notably the most reserved; its historical tensions and security accusations against Iran create a complex diplomatic landscape.
Iran’s Retaliatory Threats
Simultaneously, the ongoing Iranian threats complicate the Gulf states’ calculations, especially following Tehran’s declaration that it will retaliate against nations cooperating with the US sanctions. Iranian Economy Minister Ali Madani Zadeh claimed the country is prepared for sanctions, hinting at possible offensive measures should its infrastructure come under threat.
Moreover, Iran has issued warnings to vessels regarding their passage through the Strait of Hormuz without its consent, threatening penalties or impoundments for those that fail to comply. On the same day as the announcement of new US sanctions, only two cargo ships crossed the strategic waterway, marking the lowest daily traffic since early May. Prior to the crisis, this vital corridor accounted for approximately one-fifth of global crude oil and LNG flows.
As the full impact of the sanctions may take time to manifest, some analysts suggest that GCC states may align with US actions in the current phase due to ongoing Iranian aggression and Tehran’s accusations against them regarding involvement in military operations.
Nonetheless, these positions will likely hinge on the outcome of the ongoing confrontations and the future of navigation in the Strait of Hormuz. Ba’aboud asserts that Gulf states, particularly Oman and Saudi Arabia, will seek avenues that allow compliance with the sanctions while preserving open political and security channels with Tehran.
However, demands from Washington for its allies to choose between unequivocal allegiance to the US and engagement with Iran could transform sanctions from mere tools of pressure against Tehran into sources of discord within US-Gulf relations.