The moves come as Iraq's powerful pro-Iranian armed group Kataeb Hezbollah has "carried out a series of sharply escalating drone and missile attacks against US personnel in Iraq and Syria," said the US Treasury Department in a statement.

The surge came in the wake of the shock cross-border attack by Hamas militants from Gaza in October that Israeli officials say resulted in the deaths of about 1,140 people.

In response, Israel has carried out a relentless offensive that has killed more than 25,000 people in Gaza, according to the latest toll issued Monday by Gaza's health ministry.

Kataeb Hezbollah and other Iran-aligned militia groups in Iraq "have consistently issued statements" supporting Hamas, while declaring "their commitment to attacking US personnel," the US Treasury said.

"Iran and its proxies have sought to abuse regional economies and use seemingly legitimate businesses as cover for funding and facilitating their attacks," said Treasury Under Secretary for terrorism and financial intelligence Brian Nelson.

In a separate statement, the US State Department added that the Quds Force of Iran's Islamic Revolutionary Guard and Iran-aligned militia groups "pose a significant threat to the Middle East region."

In unveiling sanctions on Fly Baghdad and CEO Basheer Abdulkadhim Alwan al-Shabbani, the Treasury Department said the airline supported the Quds Force "by delivering material and personnel throughout the region" including weapons.

It added that since Hamas's attack in early October, Fly Baghdad "was involved in the transfer of hundreds of Iraqi fighters" in support of Iranian proxies' attacks on Israel.

The latest sanctions target a senior Kataeb Hezbollah member and drone specialist, alongside a company allegedly used to launder money and the individual managing it.

Property of designated individuals in the United States are blocked and must be reported. Financial institutions and others are also restricted in their transactions with sanctioned entities.

In November, Washington sanctioned six people affiliated with Ketaeb Hezbollah, and the leader of another Iraq-based group it said was involved in attacks against US troops in the region as well.