Iraq War Anniversary: Caught Between Powers & a Looming Oil Crisis
On March 19, 2026, as U.S. And Israeli strikes targeted Iranian assets and Iranian-backed militias launched retaliatory attacks, Iraq marked the 23rd anniversary of the U.S.-led invasion that toppled Saddam Hussein. The anniversary arrived not with a sense of liberation, but with the country once again a battleground in a wider conflict between the United States and Iran.
The 2003 invasion, intended to disarm Iraq and remove a perceived threat, instead unleashed years of instability and sectarian violence. While the stated goal was regime change, the unintended consequence was the empowerment of Iran, Iraq’s longtime adversary. According to the Council on Foreign Relations, the invasion is now ranked as the worst decision in the history of U.S. Foreign policy.
Today, Iraq finds itself caught between these same external powers. Since the escalation of tensions between the U.S. And Iran on February 28, 2026, Iran-aligned militias have repeatedly targeted U.S. Facilities, including Erbil International Airport, the U.S. Consulate in Erbil, and the U.S. Embassy in Baghdad. Hundreds of drones have been launched at bases, airports, hotels, and oil facilities across Iraqi Kurdistan. Kataib Hezbollah, a prominent militia group, announced a conditional five-day suspension of attacks on the U.S. Embassy, linking it to Israeli actions in Beirut and Baghdad, though the longevity of this pause remains uncertain.
In response, U.S. Airstrikes have targeted militia commanders and weapons depots across Iraq. Kurdish members of parliament have expressed concern that Baghdad’s relative silence threatens stability, while the Iraqi government has condemned the attacks as “hostile operations” but lacks the capacity to effectively halt them. NATO has suspended its training mission and begun withdrawing personnel, further diminishing external support for Iraq’s security forces.
The conflict is also inflicting severe damage on Iraq’s economy, which relies on oil exports for over 90% of its state revenues. Strikes have hit key sites in both the Kurdish region and the south, including Sarsang, Khor Mor, and Basra’s export terminals. Major oil fields, such as Rumaila and West Qurna 2, are offline due to storage and export bottlenecks, while Shaikan and Atrush have halted production due to security concerns. On March 12, Iraq suspended all oil operations after two fuel tankers were struck in its territorial waters near Basra.
The closure of the Hormuz corridor and continued disruptions to the northern pipeline have effectively severed Iraq’s economic lifeline. Foreign operators are evacuating staff, and companies like TotalEnergies have suspended production. Despite a surge in global oil prices – rising from around $70 to over $100 per barrel since the conflict began – Iraq is unable to capitalize, as its ability to export remains crippled.
Internal divisions are exacerbating the crisis. Longstanding tensions between Baghdad and the Kurdistan Regional Government (KRG) delayed efforts to resume northern exports to Turkey. A deal has been reached, but its impact will be limited as long as broader export constraints persist. Baghdad is now negotiating with Tehran for tanker access through the Strait of Hormuz, a sign of its diminishing options. The government is also exploring alternative export routes via Turkey, Syria, and Jordan, but these are unlikely to provide sufficient capacity.
The current predicament is rooted in the aftermath of the 2003 invasion, which dismantled the Iraqi state. While over $1 trillion in oil revenues flowed into government coffers in the following decades, little was invested in sustainable development, leaving an economy heavily reliant on oil wealth distribution. Iraq’s oil revenues are held at the U.S. Federal Reserve, giving Washington significant leverage over Iraq’s financial system and governance.
Prime Minister Mohammed al-Sudani has been pursuing an agenda aimed at restoring national sovereignty through economic reform, infrastructure development, and reduced oil dependence. A key challenge is establishing a state monopoly on force, complicated by the powerful Popular Mobilization Forces (PMF), formally part of Iraq’s security apparatus but with close ties to Tehran.
Iraq’s immediate outlook remains precarious. The Central Bank’s reserves may cover a year of imports, but prolonged conflict threatens widespread power cuts, delayed salaries, and rising unemployment. The government’s ability to maneuver is constrained by financial and military dependence, competing pressures from external powers, and entrenched domestic armed groups.
Negotiations continue, but the levers of true authority – ceasefire enforcement, investment guarantees, and control over strategic assets – remain largely in the hands of external actors. The situation remains unresolved, with no immediate diplomatic solution in sight.