US-Saudi Strikes on Iraqi Militias Pull Baghdad Into the Iran War
A new front opened on 2026-07-29 as US and Saudi strikes hit Tehran-backed Iraqi militias, extending a conflict that has already closed the Strait of Hormuz multiple times.
ICE Brent crude front-month surged about 7% on Wednesday (2026-07-29) to above $90 a barrel after President Donald Trump said the US would hit Iran hard following an attack on a US military base in Jordan — ending a diplomatic pause that had given oil markets two sessions of relative calm.5
The move reflected how quickly the market reprices when a ceasefire window closes. Oil prices had slid in the days before Wednesday (2026-07-29) as Washington and Tehran pulled back from direct exchanges to allow space for diplomacy, NBC News reported. Prior to the war, some 20% of the world's oil passed through the Strait of Hormuz, and its repeated closure sent energy prices soaring and global markets tumbling, NBC News noted.3
By Wednesday evening (2026-07-29), that diplomatic window had shut. US and Saudi strikes targeting Iraqi militias backed by Tehran opened a new front in the conflict, Foreign Policy reported, pulling Baghdad deeper into a war it had tried to avoid. The targeting of Iran-aligned groups inside Iraq marks an expansion beyond the direct US-Iran exchanges that defined earlier phases of fighting.6
Iran's response to earlier strikes had already widened the battlefield. Following attacks on the South Pars gasfield and a refinery in Asaluyeh — a large energy hub on Iran's Gulf coast — Tehran halted all supplies of gas to Iraq and threatened to strike oil facilities in Saudi Arabia, the UAE and Qatar, the Irish Times reported in March (2026-03-18).4
Iran's strike on Jordan on or around Thursday (2026-07-30) pointed toward a more deliberately aggressive posture, Oilprice.com reported. "From its perspective, an offensive initiative is a way to prove that Iran still holds the strategic initiative," one analyst told the outlet. Tehran, the analyst said, identifies American hesitation as a weakness and calculates that additional pressure will expose the limits of US willingness to escalate.7
Trump's declaration — "we'll be hitting them hard," made in a phone interview on Tuesday (2026-07-28) — was followed within 24 hours by the strikes on Iraqi militias. Foreign Policy's Situation Report on Thursday (2026-07-30) framed the violence as escalating while still following patterns established earlier in the conflict: each side pushes to a threshold just short of what would trigger a full regional war, then reassesses.8
Iran's historical approach supports reading its current moves as calibrated rather than open-ended. It denies directing proxy forces while supplying armed groups with arms and training and using them to conduct attacks, the Economist reported. A missile strike on Saudi Aramco in 2019 temporarily shut 5% of global oil production and was absorbed by the market within weeks, but it set the precedent that Gulf energy infrastructure is within range.1
The Gulf Arab states, Iraq and Jordan have all suffered direct attacks from Iran during this war, with Iraq also facing violence from Iranian-aligned militias, War on the Rocks reported in April (2026-04-07). Israel has intensively bombed parts of Lebanon in response to Hizballah attacks. The regional spread of the conflict is now the baseline condition for anyone pricing crude.2
ICE Brent crude front-month had retreated to $84.61/bbl as of Tuesday (2026-08-04), well below Wednesday (2026-07-29)'s spike above $90. The pullback suggests the market initially overpriced the escalation, then corrected as no fresh supply disruption materialised. WTI stood at $81.17/bbl and RBOB Gasoline at $2.99/gal as of the same date, with downstream products drifting lower even as crude spiked — a sign that refiners are not yet pricing in a sustained supply loss.5
With VIX at 15.86 as of Tuesday (2026-08-04), equity markets are not treating this as an acute crisis. Each successive escalation has been priced with somewhat less force than the last, as traders have learned the rhythm of attack and partial withdrawal. The next signal is whether Iran follows through on its threat against Gulf export facilities, or whether the expansion to Iraqi militia targets draws a response that affects shipping through Hormuz again.3