The Trump administration has halted shipments of U.S. cash to Iraq, in a move linked to escalating concerns over the role of Iran-aligned militias and their influence within Iraq’s political and security structures.

The decision affects approximately $500 million in physical U.S. currency drawn from Iraqi oil revenues, which are typically routed through accounts held at the Federal Reserve Bank of New York before being flown to Baghdad.

The cash transfers form part of a long-standing arrangement designed to support Iraq’s liquidity needs and stabilise its domestic currency.

According to officials familiar with the matter, the suspension is part of a broader set of measures intended to increase pressure on Baghdad to take stronger action against armed groups aligned with Tehran.

Alongside the cash halt, elements of security cooperation between the United States and Iraq have also been paused, reflecting a tightening of Washington’s stance amid ongoing regional tensions.

The decision comes against the backdrop of repeated attacks on U.S. and allied interests in the region by militia groups operating in Iraq, which Washington considers closely linked to Iranian influence.

These developments have contributed to a deteriorating security environment and have complicated Iraq’s efforts to maintain balanced relations with both Washington and Tehran.

While the halted shipments represent only a small portion of Iraq’s overall dollar inflows, they are significant for day-to-day liquidity, including retail currency demand and certain public sector functions.

Electronic dollar transfers tied to trade and imports are understood to remain unaffected, limiting the immediate macroeconomic disruption but adding pressure on cash availability.

Iraqi officials have expressed concern about the broader implications of the move, warning that prolonged suspension could affect financial stability and deepen existing political tensions.

At the same time, the United States has signalled that future financial and security support will remain contingent on measurable steps by Baghdad to rein in militia activity and strengthen central authority over armed groups.

The development highlights the increasingly complex intersection of security policy, financial leverage, and regional geopolitics as Washington continues to recalibrate its approach to Iraq amid wider instability linked to the conflict involving Iran.