Banks are under increased pressure from the US to cease trade with Iran as international tension mounts over its suspected nuclear-weapons programme.
Noor Islamic Bank announced yesterday it had stopped dealings with Iranian banks in December while HSBC revealed it faced civil or criminal prosecution in the US for dealings with Iranian customers.
The US and the EU have tightened sanctions against Iran in an effort to cut off oil revenues to the country's government.
Iran said yesterday it would accept payment in gold instead of dollars for its oil exports, as it emerged Japanese imports of Iranian crude were falling.
Khalid Al Ghaith, the Emirates' assistant foreign minister for economic affairs, said the UAE was working with the US on Iranian sanctions.
"We are still working with the US government and continue discussing to protect our bank sector and companies and continue this dialogue. This is what we are doing as a government."
Iran was Dubai's second-biggest trading partner and in 2010 trade between the UAE and Iran stood at US$10.4 billion (Dh38.2bn), although it has declined since then.
The US Treasury department restricts American financial companies from maintaining accounts with any banks that deal with the central bank of Iran.
Under a new law that came into effect yesterday as part of the western oil embargo, the department can also impose sanctions against foreign banks that deal with the central bank of Iran to process payments for Iranian crude under certain circumstances.
UN sanctions are much more relaxed than US and EU restrictions and target activities and people directly linked to Iran's nuclear programme.
"We are committed to international laws, but as far as the US sanctions are concerned, they remain US set sanctions on Iran, and we are in constant talks and discussions with them," Mr Al Ghaith added.
The UAE has been supportive of western efforts to strengthen sanctions against Iran, said a spokesman for the US Treasury.
"For a number of years, we have worked closely and well with the UAE Government, and that has been true over the last several months as we have intensified efforts to restrict Iran's access to the international financial system by implementing international sanctions against designated banks in Iran," he said.
Noor Islamic Bank traded with Iranian banks until December but then acted to halt the business, said a spokesman.
"When we became aware in December 2011 that unilateral US sanctions were to be applied against a number of Iranian banks, we took pre-emptive action to end our business relationships with Iranian banks licensed in the UAE," he said.
HSBC revealed in its annual report this week that it was the target of investigations by US authorities regarding "historical transactions involving Iranian parties" and other parties sanctioned by the US government.
The bank believes it is likely to face criminal or civil charges as a result of the investigations.
"In all cases we are cooperating fully and engaging in efforts to resolve these matters," HSBC said.
In a further sign of tightening around Tehran's economic lifeline, Japan announced that imports of Iranian crude dropped by 22.5 per cent in January.
Japan, which relies on the Middle East for most of its oil supply, has sought a waiver from the US over Iranian sanctions.
Meanwhile, Iran moved to allow its trade partners to make payments in gold instead of dollars, the Iranian news channel Press TV reported, citing Mahmoud Bahmani, the governor of Iran's central bank.
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