UPDATE 1-Iraq freezes funds of Hezbollah and Houthis, official gazette says

But Baghdad, a partner to both the United States and Iran, is wary of being caught in the crosshairs of U.S. President Donald Trump's policy to squeeze Tehran. Iran wields considerable military, political and economic influence in Iraq through its powerful Shi'ite militias and the political parties it backs in Baghdad.

Iraq will freeze the money of Iran-backed armed groups, including Lebanon's Hezbollah and Yemen's Houthis, the official gazette said.

The move will likely be welcomed by Washington, which has long sought to reduce Iran's influence in Iraq and other countries in the Middle East where Tehran has allies. Iran views its neighbour and ally Iraq as vital for keeping its economy afloat amidst sanctions. But Baghdad, a partner to both the United States and Iran, is wary of being caught in the crosshairs of U.S. President Donald Trump's policy to squeeze Tehran.

Iran wields considerable military, political and economic influence in Iraq through its powerful Shi'ite militias and the political parties it backs in Baghdad. But increased U.S. pressure over the past year comes at a time when Iran has been weakened by Israel's attacks on its regional proxies.