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The UAE has announced an end to all trade, commercial exchanges, and financial transactions with Iran after accusing Tehran of firing two ballistic missiles toward the country, an accusation Iran flatly denies.

Getting into it: Afra Al Hameli, who runs strategic communications at the UAE Foreign Ministry, announced the move in a statement posted late Tuesday. “In light of regional escalations that undermine regional and international peace and security, all trade, commercial exchanges, and financial transactions with Iran have been halted until further notice,” the statement said.

Earlier that day the UAE Defense Ministry said its air defenses picked up two ballistic missiles launched from Iran. One came down outside Emirati territorial waters and the other landed inside them. Both hit water, and the ministry said nobody was hurt and nothing was damaged. Emirati officials say the missiles were aimed at maritime traffic, and incoming fire triggered shelter warnings across the country for the first time in weeks.

Despite this, Iran says it did not do it. Foreign Ministry spokesman Esmaeil Baghaei called the accusation baseless and said it cuts against efforts to build trust between neighbors and keep the region from sliding further, according to Iranian state media.

The UAE’s decision will have real consequences for an Iranian economy already scraping bottom. The Emirates rank as Iran’s second-largest commercial partner behind China, and their value to Iran runs well past the goods they produce themselves. Iranian buyers have long used the UAE as a re-export hub: a side door for reaching third-country suppliers and commercial infrastructure that sanctions otherwise close off.