The US Treasury is actively exploring a plan to redirect frozen Iranian assets toward Gulf state allies as compensation for war-related damages.

Treasury Secretary Scott Bessent has directed his staff to obtain damage cost estimates from affected Gulf nations, including Saudi Arabia, the UAE, Kuwait, Bahrain, Qatar, and Oman. The goal: quantify the infrastructure destruction linked to Iranian military operations and figure out how much of Iran’s frozen wealth can be channeled into reconstruction.

The money at stake

Total frozen Iranian assets worldwide are estimated between $100B and $120B. Of that total, approximately $24B in frozen funds has become the focal point of US-Iran negotiations. Tehran has made the release of those funds a precondition for any broader agreement.

Iran’s Deputy Foreign Minister rejected the reparations proposal on June 7, asserting that Iranian assets should not serve as compensation for US allies.

Why Gulf states want the money

Years of missile and drone strikes have left real scars on Gulf infrastructure. Saudi Arabia, in particular, has dealt with repeated attacks on oil facilities and civilian areas linked to Iranian-backed groups. The UAE and other Gulf Cooperation Council members have faced similar threats.

Bessent’s initiative essentially tells these allies: we hear you, and we have a funding source in mind. The Treasury is actively soliciting cost estimates, which suggests this isn’t just diplomatic posturing.

Redirecting sovereign assets without international legal frameworks invites challenges at the International Court of Justice and sets precedents that other nations might find uncomfortable when applied to their own frozen funds abroad.

What this means for markets and investors

Any escalation in US-Iran tensions has historically sent energy prices higher. If Iran views the asset seizure as an act of economic warfare, retaliatory actions targeting Gulf oil infrastructure become more likely, raising supply shock scenarios that ripple through energy markets.

Tehran’s $24B precondition was already a high bar. Watching Washington redirect those same funds to Saudi Arabia and the UAE doesn’t exactly incentivize compromise.

Redirecting frozen assets as reparations without Iran’s consent could undermine existing ceasefire agreements in the region, making military options look more rational to hardliners in Tehran who already view diplomacy as a dead end.