Iran launches missile strike on U.S. Fifth Fleet Headquarters in Bahrain - Februar 28
The United States is reportedly considering a new financial lever in its conflict with Iran. Frozen Iranian assets could be used to support Gulf allies such as Kuwait and Bahrain in rebuilding after Iranian attacks. According to a person familiar with the discussions, the money could help compensate for damage already caused and for possible future damage.
The move would be politically explosive. Iran itself is demanding access to $24 billion in frozen funds as part of possible de-escalation talks. If the US were to redirect those assets to Iran’s Gulf rivals instead, it would send a signal of maximum pressure.
Frozen funds become a weapon of diplomacy
Frozen foreign assets have long been more than legal property in international conflicts. They are leverage, bargaining chips and symbols of state power. Whoever decides the fate of frozen money also helps determine the financial cost of a conflict for the state concerned.
In Iran’s case, this logic is particularly sharp. Tehran regards the frozen funds as its own property and is demanding their release. Washington, however, could now use them to compensate allies hit by Iranian attacks.
That would turn Iranian money into a political instrument against Iran. And that is what makes the idea so explosive.
Kuwait and Bahrain are in focus
According to reports, the focus is mainly on damage in Kuwait and Bahrain. Both countries are close US partners in the Gulf and were recently hit by Iranian missile and drone attacks. The US military said it intercepted several projectiles over the Gulf.
For Washington, supporting these allies is strategically important. The Gulf states are central to US military presence, energy security, regional deterrence and stability around the Strait of Hormuz. If Iran causes damage there, the United States apparently wants to show that it will not leave its partners alone.
Using Iranian funds would sharpen that message even further: anyone who attacks US allies should ultimately pay for the damage.
The Strait of Hormuz remains a global risk
The conflict does not only affect the region. The Strait of Hormuz is one of the world’s most important energy arteries. Disruptions there immediately affect oil prices, transport costs, inflation and global supply chains. Even limited military escalation can unsettle markets.
That is why financial pressure on Iran also has economic significance. The US is trying to contain Tehran without letting the situation spiral further out of control. But every step involving frozen assets could make diplomatic talks even more difficult.
If Iranian funds were actually used to compensate Gulf states, Tehran could view this as expropriation and escalation. The risk of new retaliation would rise.
De-escalation becomes harder
Talks between the US and Iran are already considered stalled. Tehran is demanding the release of frozen billions, while Washington is pushing for security guarantees, de-escalation and an end to further attacks. The possible new plan shifts the starting point.
For Iran, the message would be clear: its own assets could not only remain blocked, but actively be used against Iranian interests. That would increase domestic pressure on Tehran’s leadership to respond forcefully.
For the US, however, that is precisely the intended pressure effect. Washington could try to force Iran to choose between de-escalation and further financial losses.
The conflict gets a repair bill
The proposal shows that modern conflicts are not fought only militarily and diplomatically. They also come with a repair bill. Whoever destroys infrastructure, fires missiles or damages allies is expected to bear economic responsibility.
The principle is politically understandable, but legally and diplomatically delicate. The question of whether frozen state assets may be redirected for compensation without an agreement can trigger international disputes. Similar debates have been ongoing for years over Russian assets following the invasion of Ukraine.
The Iran case would therefore create another precedent: frozen state funds are increasingly being treated as possible instruments for war and reconstruction financing.
A hard lever with high risk
For Washington, the plan could be attractive in the short term. The US would strengthen Gulf allies, hit Iran financially and show that attacks have material consequences. But the lever is risky.
The more frozen assets are politicized, the harder later negotiations become. Tehran may see even less incentive to return to talks if key financial demands are not only blocked but turned against Iran.
The plan therefore shows the new harshness of US strategy: money is no longer just sanctions leverage, but a possible reconstruction tool. For the Gulf states, that could bring relief. For diplomacy with Iran, it would be another serious blow.
SK
