In a statement on Monday, the US slapped sanctions on Fly Baghdad and its CEO, Basheer Abdulkadhim Alwan al-Shabbani, accusing them of "providing assistance to the Quds Force", the foreign operations arm of the Revolutionary Guards, "by delivering material and personnel throughout the region" including weapons.

Responding in a statement late Monday, the airline said the US decision was "based on misleading and unreal information that cannot stand up to the law".

Fly Baghdad demanded that the US Treasury provide evidence that could "convict the company or its management".

The airline said it had "worked for years under the direct supervision of the Iraqi government, represented by the Iraqi Civil Aviation Authority and the ministry of transport".

The low-cost carrier, which offers flights to Aleppo, Beirut, Damascus, Dubai, Istanbul, Mumbai and Tehran, said its services were "continuing as usual and have not been suspended".

However videos circulating on social media, which AFP could not independently verify, purported to show passengers at Baghdad airport venting their frustration over a flight cancellation.

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

On Monday, the Treasury also announced that it had imposed new sanctions against "three leaders and supporters" of Kataeb Hezbollah, a pro-Iran armed group in Iraq.

It accused Kataeb Hezbollah of having "used Fly Baghdad flights on multiple occasions to transport bags of US currency and US-made weapons... from Iraq to Lebanon".

It also accused Fly Baghdad of having transferred "hundreds of Iraqi fighters" affiliated with pro-Iran groups "in support of the Iranian proxies' attacks on Israel".

The US sanctions come after a spate of attacks on US troops in Iraq and neighbouring Syria since an unprecedented attack on Israel on October 7 by Iran-backed Palestinian militant group Hamas sparked war with Israel in Gaza.

Since mid-October, more than 140 attacks have targeted US and other foreign troops in Iraq and Syria, most of them claimed by pro-Iran armed groups.