The United Arab Emirates (UAE) has halted all trade, commercial exchanges and financial transactions with Iran until further notice, citing regional escalation, its foreign ministry said late on August 18.

The move by one of Iran's most important trading Gulf partners and a long-standing conduit for its access to global markets points to sharply deteriorating ties, hours after a reported missile strike on the country believed to have originated from Iran. Iran has not since claimed responsibility for the afternoon hit. 

Afra Al Hameli, director of the strategic communications department at the ministry, rejected all allegations regarding the state of the economic relationship between the two countries, the ministry said. She said the halt had been imposed in light of regional escalation that undermined international peace and security.

Al Hameli restated the UAE's commitment to dialogue, cooperation and regional integration as means of advancing stability and prosperity in the region.

The UAE remained firmly committed to safeguarding the integrity of the international financial system, in line with international law and global standards, she said.

Abu Dhabi's move follows the suspension of Iranian mobile roaming in the UAE, which cut residents and travellers off from calls, texts and banking access, and comes as Dubai, long a key re-export hub for Iranian goods and a channel for financial flows around sanctions, weighs a freeze on billions of dollars held within its financial system by Iranian intermediaries.

The suspension follows a period of intermittent hostilities. The UAE last reported an Iranian strike towards earlier on its territory on July 21, when its air defences confronted missiles and drones, with no reported damage or casualties.

Senior government adviser Anwar Gargash said last week that the state would defend its rights to freedom of navigation in the Strait of Hormuz following strikes on ADNOC vessels.

The economic relationship had already been fraying. The UAE had been weighing a freeze on billions of dollars held within its financial system by Iranian intermediaries, part of a shadow banking network used to move oil revenues around Western sanctions.

Roaming for Iranian mobile operators in the UAE was also suspended, cutting residents and travellers off from calls, texts and banking access.