The U.S. Treasury Department disrupted a Dubai-based banking operation that Washington believes had become Tehran's primary conduit for evading international sanctions and processing its oil sales, according to people briefed on the operation.

The effort was particularly sensitive because the targeted institution in the United Arab Emirates is partly owned by the local government of Dubai, a close U.S. ally. The chairman of the bank, called the Noor Islamic Bank, is the son of Dubai's ruler.

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