Following the takeover of the US Embassy in Tehran by Iranian militants on November 4, 1979, where 52 American diplomats and citizens were taken hostage, tensions between the United States and Iran escalated rapidly. The Iranian Revolution and subsequent overthrow of the Shah led to widespread anti-American sentiment in Iran. In an effort to exert economic pressure on the newly established Islamic Republic and encourage the release of the hostages, US President Jimmy Carter signed Executive Order 12170 on November 14, 1979.

This executive order mandated the freezing of all Iranian assets within the jurisdiction of the United States, effectively cutting off a vital source of financial support for the Iranian government. It prohibited financial institutions from accessing Iranian funds and assets, further isolating the country economically. The freezing of these assets was accompanied by a broader review of US relations with Iran and marked a significant shift in America's foreign policy outlook. Carter's administration faced increasing pressure both domestically and internationally concerning its capacity to handle the crisis, and the impact of this executive decision was felt both in the benefit of harming the Iranian regime's economic stability and in delaying the diplomatic resolution.

The embargo on Iranian assets was part of a series of punitive actions that included economic sanctions and increased military presence in the region. While designed to encourage negotiation and resolution, these measures intensified the schism between the two nations. The hostages were ultimately released on January 20, 1981, but the freeze remained a symbol of hostility that defined US-Iranian relations in the years that followed.