On July 23, 2026, Donald Trump threatened to use frozen Iranian money held under US control to pay for any damage to ships and cargo passing through the Strait of Hormuz. Iran condemned the threat immediately, reopening one of the most dangerous disputes between the two countries.

The Strait of Hormuz is a narrow waterway between Iran and Oman through which about a fifth of the world's daily oil supply travels. It is one of the most important shipping routes on the planet.

Writing on his Truth Social platform, Trump said the damages would be paid for by "Iranian Money that the United States has in its possession, and controls." He called taking Iran's assets "the fair and equitable thing to do" (Al Jazeera).

Iranian Foreign Minister Abbas Araghchi fired back the next morning. In a post on X on Friday, July 24, he called the seizure of another country's assets to "pay for unrelated future claims" an "incendiary precedent," meaning a dangerous new example that other countries might follow. He warned that "once governments normalise confiscation, no one's assets are safe" and that the "ensuing chaos will not be pretty or peaceful" (Al Jazeera).

This dispute was already simmering. The frozen assets had been a central issue in a diplomatic agreement signed between Tehran and Washington in June 2026 as a pathway to end the war. That agreement has since collapsed. In a CNN interview published June 5, 2026, Mohsen Rezaei, an adviser to Iran's supreme leader, said talks were deadlocked over $24 billion in frozen Iranian assets and warned that the standoff could lead to a wider war (CNN).

The scale of the frozen assets is substantial. Some estimates put the total at approximately $100 billion (Al Jazeera). The US first froze Iranian funds in 1979, after American citizens were taken hostage at the US embassy in Tehran. During Trump's previous presidency, tens of billions of dollars worth of Iranian funds were locked in overseas banks.

The assets are spread across different countries. Iran has more than $7 billion in funds for oil shipments frozen at two South Korean banks, the Industrial Bank of Korea and Woori Bank, under US sanctions (Iranian Ministry of Foreign Affairs). In 2022, Iran paid its overdue United Nations membership fee using a portion of those frozen funds in South Korea. The Iranian ambassador to Seoul later confirmed the $7 billion figure publicly and urged Korea to release the funds (Iranian Embassy in Seoul).

More recently, Iran's Consulate General in Hong Kong published a press statement on July 20, 2026 saying that the release of Iran's frozen assets was being blocked by tying their return to the purchase of American goods (Iranian Consulate in Hong Kong).

The broader context here is that Trump's post does more than repeat existing sanctions policy. It lays out a plan to take Iran's money outright if something happens in the Strait of Hormuz in the future, rather than waiting for a legal process to decide the matter. There is an important difference between freezing assets, which means temporarily blocking access to the funds until a dispute is resolved, and seizing them, which means taking ownership permanently. The US has historically used freezes under its sanctions programs, while outright seizures have usually required specific legal authority, such as a court ruling tied to terrorism cases or authorization from Congress.

Araghchi's warning about normalizing confiscation is aimed at a global audience, not just Washington. The idea that one government cannot simply take another government's property without a recognized legal basis is a foundational rule of the international financial system. It is why countries feel safe keeping their central bank reserves in foreign banks. If the US were to redirect frozen Iranian assets to pay private shipping companies on its own authority, it would blur the line between enforcing sanctions and outright confiscation. Other countries holding reserves abroad, from Beijing to Riyadh, would be watching closely.

The collapse of the June agreement means there is no diplomatic framework left to manage this dispute. Rezaei's June warning that the deadlock could lead to a wider war now reads as a preview rather than a worst-case scenario. Because the Strait of Hormuz carries so much of the world's oil, any incident there would give Trump the justification he has publicly described.

Whether Trump's statement is an actual policy directive or a public posture is unclear. What is clear is that both sides have made the frozen assets question central to their public messaging, and neither has indicated a way back to the negotiating table that fell apart in June.