A view of the Dubai city skyline. (AP Photo) The United Arab Emirates has suspended all trade, commercial exchanges and financial transactions with Iran after accusing Tehran of launching two ballistic missiles towards the Gulf state, dealing a fresh blow to efforts to ease tensions between the two countries.

The UAE defence ministry said its air-defence systems detected two ballistic missiles launched from Iran towards its territory on Tuesday. The incident triggered an emergency alert on residents' phones and was described as the first direct Iranian attack on the UAE since May.

The ministry later said its assessment indicated that the missiles had been targeting maritime traffic. One missile fell into the sea outside the UAE's territorial waters, while the other fell within them.

No damage or injuries were reported. UAE freezes economic ties with TehranFollowing the missile incident, the UAE foreign affairs ministry announced that it was halting economic engagement with Iran until further notice.

The decision threatens to reverse a gradual restoration of economic and diplomatic links between Abu Dhabi and Tehran. Trade between the UAE and Iranian ports had resumed in some areas, while certain Iranian flights to the UAE had also quietly returned.

The emergency alert issued on Tuesday was the first such warning in several months, apart from a false alert in June. Iran denies launching missilesIran has denied the UAE's accusation, with Iranian Foreign Ministry spokesperson Esmaeil Baghaei rejecting the claim and warning that such allegations could undermine regional efforts to rebuild trust.

“This behaviour is contrary to the principle of good neighbourliness and disrupts ongoing efforts to strengthen trust between regional countries and prevent the escalation of insecurity in the region,” Baghaei said. “The Foreign Ministry spokesman called on all regional parties to refrain from making baseless accusations against the Islamic Republic of Iran, considering the existing complexities due to the ongoing evils of the US and the Zionist regime against regional peace and security, especially the history of numerous false flag operations,” he said.

The UAE military said its forces remained on high alert and were prepared to respond to threats against the country's security and sovereignty. Missile attack threatens fragile UAE-Iran thawThe latest confrontation comes after more than two months of efforts by Abu Dhabi and Tehran to reduce tensions that had escalated following the US and Israeli war against Iran that began on February 28.