President Donald Trump moved closer on Thursday to expanding the US campaign against Iran, threatening both a major new military operation and financial punishment as diplomacy faltered.
Trump told Israel’s Channel 12 that he was considering a “massive attack” larger than Operation Epic Fury, though he stressed that no final decision had been made and no new military orders had been issued.
“I am close to making a decision. We are fully prepared for it,” Trump said, adding that the United States could act alone but Israel would join “within two minutes” if asked.
Trump also said Iran would ultimately bear the financial cost of attacks on commercial shipping.
In a post on Truth Social, he said that “any and all damages” to ships, cargo and related property would be paid from Iranian funds under US control.
“These damages may be very substantial but, nevertheless, this is the fair and equitable thing to do,” he wrote.
Iran has nearly $100 billion in assets frozen abroad and beyond Tehran’s control, though only part of that sum is directly held by the United States or clearly within its legal reach.
The threat added an economic dimension to Washington’s military pressure as mediation efforts showed fresh signs of collapse.
Axios, citing two regional sources involved in the talks, reported that Iran had rejected the latest proposal delivered through intermediaries. One source said Tehran was “not cooperating.”
Trump struck a similar tone at the White House, telling reporters that Iran wanted an agreement but was not prepared to accept Washington’s terms.
Iranian Foreign Minister Abbas Araghchi responded by accusing figures in the US administration of ignoring “realities on the ground” and focusing instead on the 2028 presidential election.
The diplomatic impasse unfolded alongside a widening regional confrontation.
Kuwaiti authorities said hostile drones struck the Abdali border crossing with Iraq, causing material damage but no casualties. The military later reported intercepting additional drones.
The IRGC-affiliated Tasnim News Agency attributed two attacks near the crossing to Iran-allied armed groups, saying a border terminal and command building were targeted in retaliation for a reported US strike near Iran’s Shalamcheh crossing.
Iran also sharpened its dispute with neighboring states. Foreign Ministry spokesman Esmail Baghaei said Persian Gulf countries and Jordan must formally deny a US Central Command claim that they had assisted American operations against Iran.
Baghaei argued that Tehran was entitled to strike US bases and assets on their territory in self-defense if they had participated in the campaign.
Israel, meanwhile, prepared for the possibility that a broader US operation could draw it directly back into the conflict.
Defense Minister Israel Katz said the country was ready “for every scenario” and warned that Iran would face a “crushing blow” if it attacked Israel.
In Washington, the Senate voted 49-47 against advancing a resolution that would have required congressional authorization for continued hostilities against Iran, blocking an effort to limit Trump’s war powers as he considers expanding the campaign.
The panel, held at Iran International's Washington headquarters and moderated by Fardad Farahzad, brought together Michael Rubin of the American Enterprise Institute, Ilan Berman of the American Foreign Policy Council, and Iranian-American analyst Fereshteh Pezeshk.
The discussion came amid renewed US strikes, with attacks tearing through bridges and infrastructure across Iran's south.
Is Washington heading for a ground operation?
The question hanging over the room was whether the air campaign is a prelude to something larger. Rubin framed the choice in stark terms.
"When you have a hornet's nest, you have two good options. One is to leave it alone. The other one is to get rid of it," he said. "The last thing you want to do is sit underneath it lightly tapping it with a stick, and we're getting to the point where that stick tapping is over."
The open question, he added, is "are we heading to boots on the ground? And if we're heading to boots on the ground, are we simply talking about the islands in the Persian Gulf, or are we talking about some of the ports?"
Pezeshk talked about the risks. A move onto Iranian soil, she argued, would be "disastrous," and not only in military terms. "A very good population of Iranians, unlike the rest of the Middle East, are pro-American," she said, describing "a chasm between the people and the Islamic Republic" after the killing on Iran's streets.
An occupation, she warned, could close that chasm rather than widen it. "The solution is in Tehran, not on the coasts. You've got to resolve that problem."
Berman placed the same question inside American politics, noting that gasoline prices and looming midterm elections are shaping every decision the administration makes.
The task now, he said, is to establish what military planners call escalation dominance, "to show the Iranian regime that they have more firepower and they have politically more will to stay and to fight."
Regime change or transformation?
The most contested idea of the evening came from Berman, who argued that a quieter transformation has already taken place inside the Islamic Republic.
The current rulers, he said, "have a different DNA. They behave differently, they negotiate differently," a shift he traced in part to a war that opened at the very top of the escalation ladder with the killing of the supreme leader.
However, he pointed out that the change has not produced true regime change. “The Trump administration hasn’t dug deep enough... “You haven’t had regime change as most of us have historically thought about it – a transition from the Islamic Republic to a fundamentally different governing system.”
Rubin pushed the logic toward the machinery of power, describing an effort to peel away the leadership layer by layer. With the Revolutionary Guards numbering well over 100,000, he argued, "somewhere along those ranks there is someone who wants to enrich himself" and would deal with Washington.
But he cautioned that the administration may not know who actually runs the country, comparing its approach to "negotiating with the doorman in a skyscraper rather than negotiating with the owner."
Both men returned to a warning that any transition badly managed could produce something worse.
Pezeshk offered the strongest caution against treating decapitation strikes as a complete regime-change strategy. “You have to resolve the political issue in Tehran, not the manifestation.”
She pressed the point harder: removing the leadership without a plan for the day after risks chaos. "How do you ensure it's not going to be a Taliban-like power that comes in? Are you working with the opposition? Are you inclusive enough?" She saw little sign of that groundwork.
"The guy sitting in Tehran is going to be there forever until they die. The US president, two and a half years from now, is gone."
The next uprising, and a fumbled chance
If there was a shared conviction, it was that Iran's streets, not its negotiators, will decide the outcome, and that Washington keeps missing its moments there.
Berman described unrest in Iran as a cyclical force, erupting roughly every two and a half years and accelerating. The lesson of the past six months, he said, is that the US was caught flat-footed when it mattered.
When the internet went dark in January, he recounted, the administration assumed it could "just pierce that veil" with Starlink units and VPNs. Instead it found the jamming, aided by Russia and China, far more robust than expected, and its own tools not prepositioned.
"One of the most important lessons that this last half year has brought is we should be thinking now about the next round of protests, because the next protest is going to start."
Pezeshk argued it already had. She credited the January protests, set off in part by an opposition call to the streets, as "one of the biggest protests ever in Iranian history," met with a killing she put at around 40,000. Her frustration was that such a force draws so little attention in Washington.
The Kurds, the islands, and a mafia state
Asked whether the US might arm Kurdish or other groups to open a ground front, the panel was wary. Rubin noted Washington's long reluctance to back separatist movements in the region, and Pezeshk attributed the on-again, off-again talk to "the chaos of the Trump administration."
Berman said officials he had spoken to were "very nervous about the steadfastness and the resolve of these elements."
Rubin, speaking "as an analyst rather than advocate," sketched where a limited campaign might fall: not the ports, but strategic islands, from Abu Musa and the Tunbs to Kish and Qeshm, "the gateway to Bandar Abbas."
He warned that seizing Iranian territory could backfire by rallying a fiercely nationalist public. The Islamic Republic, he argued, would not be moved by the loss of land the way a normal state would.
"They act like a mafia. They don't care if part of the country is gone as long as they're still in power."
Pezeshk’s argument was that territorial occupation – whether by US forces, Kurdish groups or another regional actor – could unite Iranians around national sovereignty.
Can an ideological system make a lasting deal?
Rubin argued that the Islamic Republic’s political identity limits its ability to reach the kind of pragmatic agreement sought by the Trump administration. Rubin argued that the Islamic Republic’s political identity limits its ability to reach the kind of pragmatic agreement sought by the Trump administration.
Pezeshk was skeptical any lasting deal is possible with a system she sees as ideological to its core.
Persian Gulf states, she said, want development, not confrontation, "they do not want to go back to the 18th century," while the Islamic Republic "has a tolerance for absorbing a lot of pain just because they don't care about their people."
Whether the war ends at the table or on the coast, the panel's consensus held that its true resolution lies elsewhere.
As Rubin put it, the nuclear file, the missiles and the proxies are all "the manifestation of the root cause, which is the Islamic Republic."
