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costs for damages already inflicted on Gulf allies by Iran, the source said, adding that the US will consider using Iranian assets for repairs of any future destruction as well. The source did not specify what kind of assets the Treasury was examining.

The disclosure came a day after Mohsen Rezaei, an adviser to Iran’s Supreme Leader Ayatollah Mojtaba Khamenei, told CNN that a peace deal to end the three-month war hinged on the release of $24 billion in Iranian assets frozen by the United States.

Peace negotiations appear to have stalled, although a minister from mediator Pakistan traveled to Tehran on Saturday with a letter for Khamenei, Iran’s semi-official ISNA news agency reported.

Meanwhile, US intelligence has raised the alarm about “unhinged” spying by Israel on America’s senior Iran negotiators. Israel has been eavesdropping on Steve Witkoff, Trump’s chief negotiator, Elbridge Colby, the Pentagon’s top policy official, and Michael DiMino, a senior Middle East policy adviser, intelligence officials claimed.

The allegations, reported by The New York Times, come despite extensive military co-operation between Washington and Jerusalem during the war. Israeli officers have been working with their counterparts at US Central Command, sharing operational intelligence.

The Pentagon has raised its counterintelligence threat level for Israel to its highest level, US media reported.

In a separate development, a plane carrying Iran’s World Cup football squad landed early yesterday in the Mexican border city of Tijuana, AFP journalists witnessed, after the United States kicked off a bitter diplomatic row over visas.