What a Tangled Web is Woven

"{Iraq is increasingly bearing the economic and security costs of the widening conflict between Iran and a U.S.-Israel alliance, as attacks and shipping disruptions threaten the country’s vital oil sector and broader stability."

"Despite the close ties between Baghdad and Tehran, the conflict has intensified pressure on Iraq, trapping energy infrastructure, tanker routes, and military sites in the escalating regional hostilities."

"Shipping disruptions in the Strait of Hormuz and attacks linked to Iran-aligned militias have strained Iraq’s oil exports, the country’s main source of government revenue and the backbone of its economy.

Analysts warn that damage to Iraq’s oil and gas sector could have long-term consequences for investment, particularly after years of effort to attract foreign companies following periods of conflict and instability."

"Major international energy firms, including BP, TotalEnergies and Chevron, have invested heavily in Iraq’s energy industry, while companies such as ExxonMobil previously withdrew after spending billions of dollars on projects in the country."

Baghdad (IraqiNews.com) 

IraqiNews.com

  

"Iraq is getting caught in the crossfire of the Iran war as the only country facing strikes from both sides, and that threatens to drag the nation that has so far avoided two years of regional turmoil into a full-blown crisis."

"As the war nears two full weeks, Iraq’s situation is growing more desperate. Disruptions to Gulf shipping and strikes on oil fields and infrastructure have all but halted exports, jeopardizing a state that relies on such trade for the bulk of its revenue."

The Canadian Press 

Funeral procession in Iraq from Iranian bombardments, Canadian Press

Caught in the crossfire of this conflict where the Islamic Republic of Iran is being bombed by a U.S.-Israel coalition, Iraq is now the sole country in the region that has the dismal distinction of being hit with strikes from both the IRGC and Israel/U.S. bombing, even as Iraq has been desperate to avoid being pulled into a conflict at a time when regional turmoil, blown into full crisis mode hits a nation that is struggling to overcome the results of its own protracted internal tribal-sectarian crises. 

 

Its  high dependence on oil exports sees a dramatic cut with new disruptions to Gulf shipping and oilfield and infrastructure strikes. The bulk of Iraq's state revenues is derived from exports; that interruption threatens its revenue stream alarmingly, to the point should the shutdown of the Strait of Hormuz continue, Baghdad's oversized public-sector payroll could be threatened. A feared prelude to a country-wide risk of destabilizing civil strikes. 

 

In desperation the Iraqi federal government turned to northern Kurdish leadership in hopes of persuading them to resume exports through a pipeline to Turkey. Kurds and Turkey are like vinegar in milk; Recep Tayyip Erdogan's relentless war against Kurds make it hugely unlikely that the Iraqi Kurds could ever sign on to a expedient that flies in the face of their own interests. 

 

The Iraqi Shiite militias loyal to the Islamic Republic and at their beck and call have long threatened U.S. interests in Iraq. With the attack on Iran, the Iraqi militias have stepped up their targeting of U.S. bases leading to the U.S. mounting retaliatory strikes in defence of its troops stationed in Iraq. Drone and missile attacks now target American interests in Iraq as a response to the February 28-initiated strikes in Iran, with military bases in the Baghdad and Irbil airports and American diplomatic facilities becoming targets.

 

Members of the Iraqi armed group Kataib Hezbollah hold flags during the funeral of their members, who were killed in an airstrike amid the US-Israel conflict with Iran, in Baghdad, March 2, 2026. The Arab Weekly

 

Oilfields and energy infrastructure in the country have also been purposefully struck by Iran and the militias, to escalate the toll taken by the wider war in the region. Iraq is unique in the region for hosting, however unwillingly, the Iran-aligned forces that have entrenched themselves in the country, as well as significant U.S. interests. Disruptions to production of exports of oil through the Strait of Hormuz create an unsustainable sharp cut in government revenue even as a political transition takes place.

 

Near-daily drone attacks target Irbil, capital of Iraq's autonomous Kurdish region, even as Iran and allied groups send drone and rocket strikes throughout Iraq. In Irbil, beyond strikes at U.S. military bases, strikes aim as well for commercial sites, including hotels. Kurdish groups in northern Iraq are also being struck by the Shiite militias following reports that the Kurds signalled interest in mounting cross-border operations into Iran, should the U.S. support them. 

 

With one of the global community's largest public-sector workforces and pensioner contingents in Iraq, concerns that delays on payment of salaries due to the government's shrinking revenues leading to public  unrest, have reached anxiety proportions of high magnitude of the restive population. The war has also complicated a transition from a caretaker administration, since the U.S. opposed the nomination of former prime minister Nouri al-Maliki. 

 

Members of the Popular Mobilization Forces attend a funeral in Najaf, Iraq, Friday, March 13, 2026 for colleagues who were killed in an airstrike in Qaim. (AP Photo/Anmar Khalil) The Associated Press