On March 11, the United States and Israel conducted a strike destroying the data processing facilities of Iran’s Bank Sepah, crippling its operations. This attack against a major state-owned bank is not an isolated event. Over the past year, the US and Israel have intensified pressure on Iran’s financial sector through sanctions, cyber operations, and proscription – viewing the country’s banking system as a critical node sustaining the Islamic Republic. The attack on Bank Sepah suggests that this campaign may be entering a new phase, one in which Iran’s financial infrastructure is increasingly targeted with kinetic strikes as a means of degrading the regime’s resilience. However, this is not without risks for Washington. Conducting further strikes against Iranian banks would threaten to drag the financial infrastructure of the Gulf region into the conflict, widening its global economic ramifications.
Structural Vulnerabilities
The Iranian banking system, including the Central Bank of Iran (CBI), has long been integral to the country’s strategic posture. This role has expanded since the formation of the Islamic Republic in 1979. Several banks abandoned their pre-revolutionary independence to become directly involved in supporting Iran’s security apparatus, facilitating trade amid international sanctions, and funding regional proxies and partners. Bank Sepah, for example, is responsible for paying the salaries of Islamic Revolutionary Guard Corps (IRGC) personnel and has reportedly been involved in financing the Iranian missile program.
The intertwining of Iran’s banking sector and political institutions has brought significant structural vulnerabilities. Systemic political corruption and misconduct have led to the failure of major private banks, with the CBI ultimately forced to absorb the collapsing firms into state institutions. According to US sources, much of the country’s foreign currency reserves have been dispersed to Iran’s regional allies over the past several years in support of Tehran’s strategic aims. These factors have contributed to Iran’s long-term currency crisis and economic decline.
The current conflict in Iran has further centralized Iran’s financial system, to ensure the economic survivability of the Islamic Republic. As part of a wartime “civil defense package,” the CBI has instructed commercial banks to extend repayment deadlines, restructure existing loans, and provide emergency credit to critical businesses facing disruption from wartime conditions. These measures build on changes introduced in the lead-up to the conflict, including expanded CBI supervision of lending practices and the imposition of new CBI-enforced “red lines” governing the activities of commercial banks. At the same time, the central bank has worked to consolidate its foreign currency reserves to ensure the liquidity needed to sustain the wartime economy.
Similar measures have been adopted by other central banks during wartime. Following Russia’s 2022 invasion, for example, the National Bank of Ukraine imposed strict capital controls, ensured access to credit for critical firms, and expanded its direct management of the banking system in order to prevent financial collapse.
Yet these efforts to stabilize Iran’s banking sector have also deepened its existing vulnerabilities. As financial authority and liquidity become concentrated within the CBI and state-owned banks, disruptions to those nodes – through cyber operations, new sanctions, or kinetic strikes – risk ever greater systemic ramifications.
Expanding “Maximum Pressure”
As part of their effort to counter the Islamic Republic, the US and its allies have long sought to deepen Iran’s financial vulnerabilities. Over the past several decades, Washington has sanctioned Iranian banks, including the CBI, and frozen Iranian assets in an effort to prevent access to foreign exchange and international financial markets. This brought mixed success in undermining Iran’s missile and drone programs, and in countering its assertive regional posture.
Over the past year, the US, along with Israel, has intensified actions against Iran’s financial sector, in a return to the “maximum pressure” policy of the first Trump administration. For instance, in mid-2025, Washington sanctioned an international network of exchange houses involved in Iran’s oil trade as part of a “shadow banking” scheme. During the 12-Day War, Israel reportedly conducted damaging cyberattacks against several Iranian financial institutions, effectively shutting down Iran’s commercial banking sector for a short period. Despite these measures, Iran’s banking sector has been able to limp on, in great part through the country’s oil exports to China.
After the 12-Day War, Israel signaled its intention to take more decisive action against Iranian banks. Israeli policymakers subsequently proscribed the CBI as a terrorist entity, positioning the central bank and institutions under its control (like Bank Sepah) as possible kinetic military targets in future operations. This follows the approach Israel has employed in targeting Hezbollah-linked banks in Lebanon, as a means of degrading the group’s cohesion and capabilities.
The present conflict and new systemic vulnerabilities within the Iranian banking sector, therefore, provide the US and Israel with the opportunity to take “maximum pressure” policy to its logical conclusion. In addition to the direct kinetic strike against Bank Sepah, Bank Melli – often considered Iran’s largest commercial lender – was hit by an apparent cyberattack. This resulted in a widespread suspension of banking services. At the same time, the United Arab Emirates, a key US partner previously hesitant to participate in sanctions on Iran, is considering freezing billions of dollars’ worth of Iranian assets. This move could significantly restrict one of Tehran’s key channels for accessing foreign currency and international trade networks.
Strategic Rationale and Risks of Escalation
Escalating measures against the Iranian financial sector during this moment of vulnerability follows a straightforward rationale. Aside from undermining the regime’s ability to manage a civilian economy during wartime, disruptions to Iran’s banking system also complicate the Islamic Republic’s capacity to finance military operations and sustain support for regional partners.
Additionally, targeting financial infrastructure could amplify existing political pressures inside Iran, to the benefit US and Israeli war aims. In late 2025 and early 2026, Iran’s economic and monetary crises were key drivers behind the substantial mass demonstrations against the Islamic Republic. Further shocks to the banking system could deepen internal economic stress at a moment when the regime is already under strain, creating the conditions for new protests. Moreover, targeting institutions responsible for paying the IRGC rank-and-file, like Bank Sepah, could be intended to bolster attempts to encourage defections from within the Islamic Republic’s security apparatus.
In the near term, the US and Israel may continue cyberattacks and kinetic strikes against Iranian financial institutions, particularly as they press the Islamic Republic to surrender. This will likely include operations designed to disrupt the physical and digital infrastructure of Iranian banks, but could escalate to target bank offices and CBI leadership – especially given that Israel has previously demonstrated a willingness to attack other ostensibly civilian organizations, such as quasi-state media facilities.
The strike on Bank Sepah therefore represents more than an isolated attempt to disrupt an IRGC-linked institution. Rather, it reflects a broader shift toward treating financial infrastructure as part of the battlefield with Iran. For the US and Israel, Iran’s centralized and regime-dominated banking system presents an attractive means through which economic, political, and military pressure can be applied simultaneously.
Expanding the battlefield to include financial infrastructure also carries significant risks, especially for the Trump administration. The attack on Bank Sepah has already invited Iranian threats to retaliate against international financial interests much as it has targeted US and aligned military installations. This has already prompted a decline in the value of US bank stocks and an evacuation of bank offices in Qatar and the United Arab Emirates. The negative economic effects of the conflict will only worsen if Iranian retaliation and a spiraling “war of the banks” further rattles the Gulf region’s financial hubs.
In the near-term, this would fit with Iran’s strategy of seeking to drive a wedge between Washington and its allies, and may diminish the US public’s already negative view of the conflict. Such factors will make it increasingly difficult for the Trump administration to convincingly de-escalate while still declaring victory. Policymakers will need to determine if the potential advantages of targeting Iranian banks are worth these risks.
