The fight for the Iron Throne may have taken a backseat during the Battle of Winterfell, but now that it's over, it's clear that Dany has her eye on the prize. On Sunday's episode of Game of Thrones, Dany made Gendry the Lord of Storm's End in a surprise turn of events that could shift the loyalties of the people at Winterfell.
After the third episode of Season 8 began with a recap of the moment that Jon (Kit Harington) told Dany (Emilia Clarke) who his real parents were, it was clear that the revelation would play a major role in the wake of the White Walkers' defeat. And it definitely did, as shortly after the battle was ended and the bodies were burned, Dany decided to make Gendry (Joe Dempsie) the Lord of Storm's End in a spur of the moment decision that could cause major ramifications in the fight for the Iron Throne.
As Gendry pointed out, he is the bastard son of the late king Robert Baratheon, whose death kicked off the series and the scramble to take control of the Iron Throne. However, since Robert and his brothers — and his sons with Cersei — are all dead, there is no current ruling lord of their home, but as Queen, Dany has the power to give him a title and make him the Lord. By doing so, as she explained in a conversation with Tyrion (Peter Dinklage), Dany has ensured that Gendry will be loyal to her out of gratitude for the fact that he has legitimized him and ensured that he has money, a title and power.
Gendry's new title means that he can now marry other people with titles and names — as he demonstrated by proposing to Arya, who turned him down on the basis of the fact that she has never been a lady. In a way, that was actually a good thing, as having Arya and Gendry married would switch her allegiance from Jon to Dany, out of loyalty to the monarch who made their marriage possible.
However, turning Gendry into a Lord will have long term ramifications; now that she knows that Jon also has a claim to the Iron Throne (and since she doesn't trust his ability to keep that claim a secret), it's important for her to have enough people willing to fight on her side for her right to rule the Seven Kingdoms. Gendry has proven himself to be a talented and skillful fighter, and having him to lead an army in her honor could possibly help her turn the tide of the fighting. As she's always said, the only thing that Dany has ever cared about is getting to redeem her family name and take back the Iron Throne in their honor. By lining up as many people to fight on her side as possible, she's playing the long game in order to put herself in the best position to take control.
Even more importantly, giving Gendry a title could possibly weaken the Starks' tight-knit support of one another. While Arya isn't obligated to support Gendry, it's clear that she has a lot of love an affection for him, and so having to fight against him in order to defend her brother and his claim to the throne would likely be difficult for her.
While it's unlikely that Dany is aware enough of Gendry and Arya's relationship to have made her decision to legitimize him based on that, it's clear that she is willing to do whatever it takes in order to become Queen of the Seven Kingdoms.