Iraq is caught in the crossfire of the Iran war, with attacks by both
sides on its soil
[March 14, 2026]
By SAMYA KULLAB
IRBIL, Iraq (AP) — 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.
If the shutdown continues, Baghdad could be unable to meet its oversized
public‑sector payroll as soon as next month, risking widespread unrest,
two Iraqi Kurdish officials said.
The federal government has appealed to northern Kurdish leaders to
resume exports via a pipeline to Turkey, but talks remain deadlocked
over longstanding domestic issues. The officials spoke to The Associated
Press on condition of anonymity to discuss sensitive political matters.
In the meantime, a parallel conflict to the wider war has escalated
between Iran-backed Iraqi militia groups and the U.S. Near-daily drone
strikes have targeted American interests across the country, while the
U.S. has struck back against militia bases to defend its troops.
Since the war began Feb. 28 following a major U.S. and Israeli strike in
Iran, drone and missile attacks have targeted American interests in
Iraq, including military bases in the Baghdad and Irbil airports, and
U.S. diplomatic facilities. Iran and its allied Iraqi militias also have
struck oil fields and energy infrastructure to escalate the economic
toll.
Unlike other Middle Eastern states touched by the war, Iraq hosts both
entrenched Iran-aligned forces and significant U.S. interests. Its
economy depends overwhelmingly on oil, so disruptions to production or
exports through the Strait of Hormuz could sharply cut government
revenue just as a fraught political transition grips Baghdad.
The longer the conflict lasts, the greater the risk that economic
shocks, political paralysis and friction with Iran‑backed militias will
combine to unravel Iraq’s hard‑won relative stability.
Proxy battles
Leaders in Baghdad and Irbil continue to urge caution and insist the war
must not be fought on their soil, but the conflict’s trajectory is
increasingly slipping beyond their control. The U.S. has communicated
assurances to Iraqi leaders that the country won't be dragged into the
regional war, according to the two Kurdish officials who spoke to AP.
In the war's opening days, drone and rocket strikes by Iran and allied
groups began targeting U.S. bases, diplomatic missions and oil
facilities. In Irbil, the capital of Iraq’s autonomous Kurdish region,
near‑daily drone attacks have targeted not only U.S. military and allied
interests but also commercial sites and even hotels.
Iran-backed groups have also struck Kurdish groups based in northern
Iraq after reports that Washington planned to arm some of them to press
against Tehran. Some Iranian Kurdish leaders have signaled their
willingness to mount cross-border operations into Iran if supported by
the U.S..
Iraq is operating under a caretaker government after the U.S. opposed
the nomination of former Prime Minister Nouri al‑Maliki. Caretaker
premier Mohammed Shia al‑Sudani, with even more limited powers, lacks
the influence to rein in powerful militia groups.
The U.S. has struck back, striking militia sites across the country,
including in Jurf al-Sakhr, south of Baghdad, northern Iraq and in al-Qaim,
along the Iraq-Syria border.
As in past upheavals, Iraqis have learned to adapt to daily violence
that intrudes on everyday life.
At an Irbil cafe, patrons heard the whine of incoming drones, then a
muffled explosion, before a plume of smoke rose on the horizon where it
was shot down. A waiter urged calm, saying the strikes were aimed at the
U.S. Consulate or airport and posed no direct threat to customers.
Major fiscal shocks
The gravest threat to Iraq’s stability is disrupted oil production,
which could cripple government revenues. The Kurdish officials said
Baghdad warned them that public-sector payrolls could be disrupted as
soon as next month.
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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)
To alleviate the pressure, Baghdad has asked for exports of at least
250,000 barrels per day of crude from fields in Kirkuk via the
pipeline to Ceyhan in Turkey that runs across Kurdish territory.
Talks have stalled, however, after Kurdish negotiators conditioned
the move on lifting an existing U.S. dollar embargo and restoring
economic benefits tied to trade.
Iraq’s government ordered production curtailed from oil fields in
southern Iraq, where the majority of its 4.8 million barrels per day
is produced, after the war all but stopped traffic through the
Strait of Hormuz and militias attacked facilities. Sales from oil
account for over 90% of state revenues.
Iraq has one of the world’s largest public‑sector workforces and
pensioner rolls, and past payment delays have sparked mass protests.
Production has been halted at oil fields hit by strikes. In the
Kurdish region, Canada’s ShaMaran Petroleum and U.S. private firm
HKN have suspended output at the Sarsang and Atrush blocks.
“If oil exports are disrupted, the immediate impact would likely be
a decline in the value of the Iraqi dinar. This would quickly
trigger inflation, and within a short time the prices of basic goods
could rise sharply,” said Farhad Soleimanpour, an Iraqi Kurdish
political analyst.
“For the Kurdistan region, the situation could be even more
difficult because it does not have its own central bank or
significant financial reserves. Iraq may be able to withstand the
shock for several months, but the Kurdistan Region would likely face
immediate financial pressure,” he added.
The war has also battered power supplies.
The Khor Mor gas field in the autonomous Kurdish region is offline,
cutting electricity generation by nearly two‑thirds. Where the
region once provided 24‑hour power, households now receive just four
to six hours a day, said Omed Ahmad, spokesperson for the Kurdistan
Region’s Ministry of Electricity.
Political weaknesses
Since the November 2025 election, Iraq has been without a government
after the U.S. opposed the return of al‑Maliki, the former prime
minister. The war complicates the fraught transition, forcing a
caretaker administration with severely limited powers to manage the
fallout.
But that caretaker status also lets Iraqi leaders deflect
responsibility by claiming they lack the authority to act, said Iraq
analyst Tamer Badawi. “No one wants to take this big responsibility
at the moment,” he said.
That would mean taking charge and reining in multiple armed groups,
from Iran‑backed militias targeting U.S. interests to
Kurdish‑Iranian opposition factions, whose actions deepen fault
lines that could spark civil unrest.
Even if some oil is exported via the pipeline, there is no way to
assure the infrastructure will not come under attack by militia
groups, officials have warned.
Iraq has defied the odds so far, largely avoiding the regional
upheaval from the war in Gaza that began in 2023. Political and
religious leaders have remained committed to keeping the country out
of wider conflict and preserving its stability.
“Iraq faces pressure to maintain neutrality while different
political groups inside the country have opposing positions
regarding the conflict," Soleimanpour said. "Some factions support
closer relations with Iran, while others prefer stronger cooperation
with the United States and Western countries. This internal division
increases political tension.”
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