By Dr. Pshtiwan Faraj

The confrontation surrounding Iran is entering a more dangerous phase in which economic pressure, maritime warfare and Iraq’s unresolved militia problem are becoming increasingly interconnected. The United Arab Emirates’ decision to suspend trade, commercial exchanges and financial transactions with Iran until further notice represents a major escalation against one of Tehran’s most important economic gateways. At almost the same time, Baghdad is struggling to enforce a September 30 deadline for militia disarmament while Tehran sends senior officials to Iraq to prevent the confrontation between the Iraqi state and Iran-backed armed groups from becoming violent.

These developments are not separate crises. They are increasingly parts of the same strategic struggle over Iran’s ability to project power while absorbing the economic costs of confrontation. In the Gulf, Tehran is attempting to retain leverage over the Strait of Hormuz. In Iraq, it is attempting to preserve the armed networks that give it strategic depth. The UAE and the United States, meanwhile, are seeking to raise the costs of both strategies without necessarily triggering a wider regional war.

The result is a dangerous contest in which Iran’s economic lifelines and military networks are coming under pressure simultaneously.

The UAE Turns Economic Interdependence Into a Weapon

On August 18, the UAE announced that it would halt all trade, commercial exchanges and financial transactions with Iran until further notice. The announcement followed the Emirati claim that two ballistic missiles had been launched from Iran toward the UAE, with one falling within Emirati territorial waters. Tehran denied responsibility for targeting the UAE.

The significance of Abu Dhabi’s decision extends far beyond the immediate missile incident.

For years, the UAE has functioned as one of Iran’s most important commercial gateways. Dubai in particular has been deeply connected to Iranian importers, traders, financial networks and re-export businesses. Even under extensive American sanctions, Iranian companies have relied on the UAE’s commercial infrastructure to access international goods and financial channels.

That relationship has now become a vulnerability.

The UAE is effectively demonstrating that economic interdependence can be converted into strategic leverage when the political relationship deteriorates. Rather than merely responding militarily to Iranian pressure, Abu Dhabi is targeting one of the mechanisms that has helped Tehran survive sanctions and economic isolation.

Reuters described the measure as a financial embargo against Iran, while other reporting has emphasized the UAE’s importance as a trading and re-export hub for the Iranian economy.

The timing is especially important because the dispute over the Strait of Hormuz has transformed maritime access into a central instrument of the regional confrontation.

Iran has sought to use control over, or disruption of, maritime traffic through the strait as leverage against its adversaries. The UAE has increasingly presented attacks on commercial shipping as an assault on freedom of navigation rather than merely another episode in the wider Iran-U.S. conflict. Abu Dhabi has also accused Iranian forces of targeting Emirati-linked commercial vessels.

That creates a strategic dilemma for Tehran.

The more Iran attempts to use Hormuz as leverage, the more incentive the Gulf states have to develop alternative routes, strengthen cooperation with Washington and impose economic costs on Iran itself.

The UAE's latest decision is therefore not simply retaliation. It is part of a broader effort to demonstrate that Iran cannot simultaneously threaten Gulf commerce and expect Gulf economies to remain open to Iranian trade.

Iran’s Economic Escape Routes Are Shrinking

The economic consequences could be considerable.

Iran has already been operating under severe sanctions and wartime pressure. The UAE's decision threatens one of the commercial ecosystems that has allowed Iranian businesses to continue importing goods, moving money and circumventing some of the effects of international sanctions.

This is precisely why the decision could prove more consequential than another round of sanctions imposed by Washington.

The UAE is geographically close to Iran, commercially integrated with the region and deeply embedded in global shipping and financial networks. Cutting direct commercial and financial links therefore creates friction at the point where Iran has historically benefited from proximity to a major international trading hub.

Tehran can attempt to redirect commerce through other jurisdictions. Iranian traders have considerable experience adapting to sanctions. But alternative routes are likely to be more expensive, slower and more difficult to operate at scale.

The central question is therefore whether Tehran will regard these economic costs as sufficient reason to moderate its behavior around Hormuz.

There is little evidence so far that it will.

Iranian strategic thinking has repeatedly treated economic pain as an acceptable cost when national security or regime survival is perceived to be at stake. If Tehran concludes that control over maritime access provides greater strategic value than maintaining normal economic relations with the UAE, it may accept substantial commercial losses.

That would be a dangerous calculation.

A prolonged confrontation could create a feedback loop in which Iranian pressure on shipping produces Gulf economic retaliation, which in turn produces greater Iranian military pressure.

The Strait of Hormuz would then become not merely a maritime chokepoint, but the center of an escalating economic war.

Hormuz Is Becoming the Region’s Strategic Pressure Point

The importance of Hormuz cannot be overstated.

The strait remains one of the world's most important energy chokepoints, and disruptions have already dramatically reduced maritime flows. Current reporting indicates that crude movements through the strait have fallen sharply compared with pre-war levels.

For Iran, this creates leverage.

For everyone else, it creates vulnerability.

That distinction explains why the United States and Gulf states are increasingly focused on developing ways to reduce dependence on the waterway. The UAE has already explored infrastructure designed to bypass Hormuz, while Iraq and other regional producers have also been examining alternative export corridors.

This is one of the most important long-term consequences of the current confrontation.

Iran may be able to disrupt maritime traffic temporarily. But every disruption encourages its neighbors to invest in alternatives that reduce Iran's future leverage.

The strategic paradox is that Iran's attempt to weaponize Hormuz could eventually diminish the importance of Hormuz to regional energy security.

For Iraq, the stakes are particularly high.

Baghdad remains heavily dependent on southern oil exports, much of which ultimately relies on maritime routes through the Gulf. Any prolonged disruption therefore threatens Iraq's fiscal stability and its ability to generate the revenues necessary to sustain the state.

Iraq has already been exploring alternative routes and arrangements to reduce its exposure to Hormuz. Kurdish Policy Analysis has examined how the strait crisis is increasingly forcing Baghdad to reconsider its strategic dependence on maritime exports.

But the economic issue is only half of Iraq's problem.

The other half is political.

Baghdad Is Caught Between Washington and Tehran

Iraq's militia disarmament crisis is now developing alongside the Hormuz confrontation.

Prime Minister Ali al-Zaydi has established September 30 as the deadline for armed factions to surrender their weapons or bring them under state control. Yet the government's ability to enforce that deadline remains uncertain.

The latest developments around Jurf al-Sakhr illustrate the problem.

The area south of Baghdad has remained under the influence of Kataib Hezbollah for years and has served as an important strategic location for the group. Reports initially suggested that Baghdad might deploy security forces to retake or challenge the militia's control of the area. More recent reporting indicates that the government has instead considered deploying a special Counter Terrorism unit primarily to monitor movement around the area rather than launch an immediate military operation.

That distinction is crucial.

A government that surrounds a militia stronghold but does not enter it is demonstrating pressure without necessarily demonstrating sovereignty.

Baghdad understands the danger.

A direct assault against an entrenched Iran-backed militia could trigger a confrontation that could quickly spread beyond Jurf al-Sakhr. Powerful militias possess weapons, political connections, intelligence networks and supporters embedded within Iraq's broader security architecture.

The government therefore has an extraordinarily difficult calculation to make.

If it moves too aggressively, it could trigger civil conflict.

If it moves too cautiously, it could convince the militias that the state lacks the political will to enforce its own decisions.

Iraq's dilemma is therefore not simply about weapons.

It is about credibility.

Tehran Is Moving to Prevent an Iraqi-Militia War

Iran clearly understands the stakes.

Senior Iranian officials have traveled to Baghdad in recent weeks to discourage confrontation between the federal government and Iran-aligned armed factions. Parliament Speaker Mohammad Bagher Ghalibaf reportedly discussed proposals designed to prevent an armed confrontation and preserve a political settlement around the militia question. IRGC Quds Force commander Esmail Ghaani has also been involved in discussions with Iraqi actors.

Tehran's preferred solution appears to be negotiation rather than war.

That does not necessarily mean Iran wants the militias disarmed.

The distinction matters.

Iran may support bringing some weapons under formal state structures while simultaneously seeking arrangements that preserve the political and organizational power of its allies.

That would allow Tehran to prevent a confrontation while maintaining strategic influence.

The danger for Baghdad is that a settlement could become cosmetic.

Weapons might be transferred, hidden or nominally placed under state control while commanders, political networks and financial structures remain intact.

That would amount to reorganization rather than disarmament.

Kurdish Policy Analysis has previously examined this problem, arguing that Iraq's militia integration process risks producing a dual security architecture in which armed groups remain politically autonomous despite being formally incorporated into state institutions.

The real measure of disarmament therefore cannot be the number of weapons handed over in public ceremonies.

The real test is whether militia organizations surrender independent command, intelligence, financing, recruitment and operational capabilities.

Ghalibaf’s Baghdad Mission Is About More Than Militias

Ghalibaf's visit also highlights the broader economic dimension of Iran's relationship with Iraq.

Iran has an enormous interest in ensuring that Iraq does not become strategically independent of Tehran at precisely the moment when Iran's own economic and military position is under unprecedented pressure.

Iraq is valuable to Tehran for several reasons.

It provides strategic depth.

It provides political influence.

It provides economic opportunities.

It provides land access across the region.

And it contains armed organizations capable of imposing costs on Iran's opponents.

That makes Iraq far more than another neighboring state.

It is one of the pillars of Iran's regional strategy.

This explains why Tehran has simultaneously engaged Baghdad over militia disarmament, border security, trade, transportation and oil exports.

The objective is not necessarily to control Iraq directly.

It is to ensure that Iraq remains sufficiently dependent on Iranian political, economic and security networks that Baghdad cannot easily become an independent strategic platform for Washington and the Gulf states.

The Peshmerga Question Reveals the Real Power Struggle

The militia debate becomes even more complicated when Iranian-backed factions attempt to place the Kurdistan Region's Peshmerga into the same category as independent militias.

That comparison is strategically and legally problematic.

The Peshmerga operates within the constitutional framework of the Kurdistan Region and has an established role in Iraq's security architecture. It has also been a critical partner in the international campaign against ISIS.

Iran-backed groups demanding the dismantling of the Peshmerga alongside their own disarmament therefore risk transforming a debate about state sovereignty into an attempt to reshape Iraq's internal balance of power.

That matters because weakening the Peshmerga while leaving powerful Iran-aligned factions politically and militarily intact would not produce a stronger Iraqi state.

It would produce a different balance of power inside Iraq.

It could also create security gaps in disputed territories where ISIS remnants continue to exploit weaknesses between federal and Kurdish forces.

The Peshmerga question should therefore be treated separately from the question of independent militia disarmament.

The distinction is fundamental: state-authorized regional security forces are not automatically equivalent to partisan armed organizations operating through political networks.

The September 30 Deadline Is Becoming a Strategic Test

The September deadline is now approaching at exactly the wrong moment.

Iran is under extraordinary external pressure.

The UAE has cut economic ties.

The Strait of Hormuz remains severely disrupted.

Washington is pushing for greater restrictions on Iranian influence.

And Tehran is attempting to preserve its regional networks.

Under these circumstances, Iraq's militia question becomes far more strategically important to Iran.

Tehran may calculate that losing control over its Iraqi partners would be more damaging than accepting additional economic pressure elsewhere.

Iraq, meanwhile, has to decide whether it can enforce state authority without destroying the political system that sustains the government itself.

That is the central paradox of the Iraqi state.

The government is attempting to disarm organizations that are simultaneously embedded within the political system on which the government depends.

This is why the September 30 deadline could become one of the most important political-security tests Iraq has faced since 2003.

If the deadline passes without meaningful disarmament, the militias will have demonstrated that they can negotiate indefinitely with the state.

If Baghdad attempts to enforce it militarily, Iraq could face an internal armed confrontation.

If Tehran successfully negotiates a compromise, Iran could preserve much of its influence while allowing Baghdad to claim that the disarmament process has begun.

None of these outcomes produces a clean victory for Iraqi sovereignty.

Washington Has a Difficult Choice

The United States also faces a strategic dilemma.

Washington wants Iraq to exercise sovereign control over its territory and prevent attacks against American and regional targets.

But excessive American pressure could produce the opposite result if Iraqi factions portray the disarmament campaign as an American attempt to dictate Iraq's internal security architecture.

Tehran would then have an opportunity to frame itself as the defender of Iraqi sovereignty.

The United States therefore needs Baghdad to succeed without making the Iraqi government appear to be acting merely at Washington's direction.

That requires patience, intelligence cooperation, economic incentives and diplomatic pressure rather than simply demands for immediate military action.

Washington's leverage is substantial.

But Iraqi political legitimacy cannot be outsourced.

Iran Is Facing a Strategic Choice

The UAE's economic decision and Iraq's militia crisis ultimately point toward the same question: how much is Tehran willing to sacrifice to preserve its regional leverage?

Iran can reduce tensions.

It can negotiate over Hormuz.

It can moderate pressure on Gulf shipping.

It can encourage its Iraqi allies to accept meaningful disarmament.

Or it can continue treating economic isolation and regional confrontation as acceptable costs for maintaining strategic influence.

The evidence so far suggests that Tehran is attempting to preserve its core positions while avoiding uncontrolled escalation.

That strategy may work for a time.

But it becomes increasingly difficult as the pressure accumulates.

The UAE is closing an economic gateway.

The United States is increasing pressure.

Iraq is attempting to strengthen state authority.

Regional states are searching for alternatives to Hormuz.

And Iran's armed partners are being forced to choose between confrontation and integration.

The danger is that each individual pressure point may appear manageable while their combined effect becomes transformative.

The Real Battle Is Over Iran’s Strategic Depth

The current crisis should therefore not be understood simply as an argument about the Strait of Hormuz or Iraqi militias.

It is a contest over Iran's strategic depth.

For decades, Tehran has constructed a regional system in which economic networks, political alliances, armed organizations and geographic corridors reinforce one another.

Iraq is central to that system.

Hormuz is another pillar.

The UAE has historically been an important economic gateway into it.

The current regional confrontation is attacking those pillars simultaneously.

That creates enormous pressure on Tehran—but it also creates incentives for Iran to fight harder to preserve them.

This is why the UAE's economic embargo could lead to more, rather than less, confrontation.

And it is why Baghdad's militia disarmament process could become much more dangerous as September approaches.

The fundamental question is no longer whether Iran can survive sanctions or whether Iraq can formally announce a disarmament policy.

The question is whether the regional balance is beginning to shift against the architecture of Iranian influence that has dominated much of the Middle East for years.

If it is, Tehran will almost certainly resist.

The UAE has already demonstrated that it is prepared to turn economic dependence into economic pressure. Baghdad is attempting, cautiously, to turn constitutional authority into actual state control. Washington is attempting to reinforce both processes without triggering another regional war.

The coming weeks will reveal whether these pressures can force strategic adaptation in Tehran—or whether Iran will conclude that the cost of confrontation is still lower than the cost of surrendering its regional leverage.

For Iraq, the answer will be especially consequential.

Baghdad is no longer merely navigating between Iran and the United States.

It is being forced to decide whether it can become a strategic actor in its own right.

And that may be the most important battle of all.

Further Reading: Iraq’s militia disarmament deadline is approaching. Tehran is testing whether Baghdad can enforce its own law and Iran’s Hormuz message to Iraq may be less generous than western reports suggest.

About the Author: Dr. Pshtiwan Faraj is the founder and editor of Kurdish Policy Analysis, an independent platform focused on Kurdistan, Iraq, Iran, Middle Eastern geopolitics, security, energy and strategic affairs.

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