“Everything Will Change”: Iraq After the Assassination of Ali Khamenei
02 Mar 2026
The assassination of Iran’s Supreme Leader revived long-standing questions inside Iraq about influence, arms, and the economy, placing ruling forces before a test they had not anticipated: What has changed since the dawn of 28 February? And how is a crisis managed as it intersects with military strikes, market turmoil, and the risk of oil markets disruption?
“Everything will change.”
A senior figure within Iraq’s Shi‘i Coordination Framework said quietly.
The assassination of Ali Khamenei at dawn on 28 February 2026, in a large-scale US–Israeli strike on Tehran, was never going to remain an Iranian event. Within hours, the region shifted.
US President Donald Trump publicly confirmed the killing as US and Israeli strikes continued inside Iran, followed by Iranian missile and drone retaliation. Escalation was no longer rhetorical. It was operational.
Iraq found itself immediately inside the equation — by geography, by political alignment, by armed networks tied to Tehran, by the presence of US forces on Iraqi soil, and by an oil-dependent economy linked to Gulf export routes now shadowed by instability. For several hours, Baghdad’s political class was suspended. According to a source inside the Coordination Framework, conflicting reports circulated deep into the night. Some insisted Khamenei had survived. Others refused to react until confirmation arrived. When the death was verified, something shifted. WhatsApp groups where politicians habitually debate policy fell silent. Messages reduced themselves to elegies for the “Supreme Leader.”
According to the same source, a post-Khamenei era will inevitably re-order influence inside Iraq. Over the past two decades, many political actors built their leverage through relatively stable and direct relationships with Iranian decision-making centres. A rupture at the top of that system destabilises those channels. “Some players see this as a moment to reposition,” the source said. “Others treat it as a period of deep uncertainty that requires caution.”
Official Mourning and Calibrated Fighting
At the official level, the Iraqi government declared three days of national mourning and described the assassination as a “flagrant aggression and a condemnable act that violates all humanitarian and moral norms,” according to a statement issued by the office of the outgoing Prime Minister Mohammed Shia Al-Sudani. The statement came swiftly, carried a clear condemnation, and called for an end to the war and escalation.
In Baghdad, crowds gathered near the Suspension Bridge leading to the Green Zone. Protesters attempted to reach the vicinity of the US embassy, but the roads leading to the fortified area were closed, security reinforcements were deployed, and water cannons and tear gas were used to disperse the demonstrators.
Central and southern governorates witnessed similar protests and gatherings, where images of Khamenei were raised and calls were made to avenge him, while an official holiday was declared in Basra and Dhi Qar, and a number of other governorates.
Further, factions operating under the name “Islamic Resistance in Iraq” announced the execution of operations against US targets inside Iraq and in the region. Among the most prominent of these factions are Kataib Hezbollah, Harakat Al-Nujaba, and Kataib Sayyid Al-Shuhada. The strikes targeted the vicinity of Erbil International Airport, Balad Air Base north of Baghdad, sites in Basra, and Imam Ali Base in Nasiriyah.
In contrast, the area of Jurf Al-Sakhr north of Babil was subjected to US–Israeli strikes that resulted in the deaths of members of Kataib Hezbollah. In Nineveh governorate, the headquarters of the 50th Brigade affiliated with the Popular Mobilization Forces was targeted by five drones, two of which were shot down before reaching the target. The Popular Mobilization Forces later announced the death of four members of the 41st Brigade affiliated with Asaib Ahl Al-Haq in an attack it described as a “Zionist aggression” that targeted a headquarters in the subdistrict of Al-Wajihiya in Diyala governorate. Asaib Ahl Al-Haq, a faction that has not yet announced its involvement in the war, organized funeral processions for the four individuals.
Despite the expansion of regional escalation, the level of attacks inside Iraq remained controlled within a set ceiling, as no large waves of rockets were launched, nor were operations carried out targeting foreign centers of a civilian nature.
A source within the Coordination Framework says some political actors are keen to preserve a margin of maneuver for armed factions, space that would allow them to recalibrate if regional dynamics shift. This could include a de-escalation similar to the one that followed the height of the war in Gaza, when Iraqi factions suspended their operations after weeks of attacks.
However, sources close to the factions say the current confrontation differs in both context and stakes. One such source indicated that the factions are considering targeting areas where US forces are present inside Iraq — including bases in Erbil — as well as carrying out operations beyond Iraq’s borders, among them the potential use of drones against targets in the UAE.
This trajectory, the source suggests, would place Iraq before further regional complications, widening the scope of diplomatic and security repercussions beyond the domestic arena.
According to the same source, the government’s assurances that Iraq would not be drawn into the conflict began to erode from the first moments of escalation. “Sites affiliated with the factions are being shelled continuously,” the source said, “and drone launch platforms are tracked and struck as soon as they are detected.”
Iraqi Oil Exports Under Threat
The most consequential development unfolded in the Strait of Hormuz, the maritime corridor through which nearly one-fifth of global oil trade passes. Iranian state television, IRIB, announced the targeting of an oil tanker that had attempted to cross despite warnings, claiming the vessel was sinking. The European EUNAVFOR Aspides mission reported that ships had received notices prohibiting passage. Reuters, citing commercial sources, indicated that shipments of crude and fuel had been suspended, while Iran’s Fars News Agency reported that tanker transit had stopped altogether.
For Iraq, the strait is not a distant flashpoint but the primary artery of state revenue. More than three million barrels per day are exported through Basra’s ports, accounting for over 90 percent of public income. Continued production in southern fields such as Rumaila, West Qurna, and Majnoon does not ensure sustained exports if navigation is disrupted. Iraq’s oil system relies on direct pumping to ports with limited storage capacity, leaving little buffer to regulate short-term shocks. A prolonged closure would likely force gradual production cuts and place immediate pressure on salary payments and operational spending.
In the Kurdistan Region, Norway’s DNO and the UAE-based Dana Gas suspended part of their output at Tawke, Peshkabir, and Khor Mor, removing roughly 200,000 barrels per day from the market, around 5 to 6 percent of Iraq’s total exports. While significant, this remains limited compared to the systemic impact of disruption in the south.
The Iraqi Ministry of Oil convened an emergency meeting to examine mechanisms for maintaining exports and fulfilling contractual obligations, as marine insurance premiums and tanker fees rose to record levels. Any sustained increase in transport costs would directly reduce net revenues, which are already strained by a deficit in covering state operational expenses.
Caretaker Foreign Minister Fuad Hussein warned that continued escalation would deepen energy market disruptions and undermine global market stability.
Iraqi Markets in Disarray
In local markets, the dollar climbed in the parallel exchange market on the morning of 1 March to between 157,000 and 157,500 dinars per 100 dollars — an increase of nearly 6 percent within days. The fluctuation carries immediate implications in an economy heavily dependent on imports to meet the bulk of consumer demand.
Annual trade between Iraq and Iran is estimated at between $12 and $15 billion, covering foodstuffs, agricultural goods, and construction materials. Any disruption in cross-border transport — or further volatility in the dollar exchange rate — translates directly into higher prices in Iraqi markets.
The electricity sector presents another point of vulnerability. Iraq imports between 40 and 50 million cubic meters of Iranian gas per day, supporting the generation of roughly 7,000 to 8,000 megawatts, nearly one-third of actual output. Disruptions to these supplies have already manifested in longer power outages, particularly in Baghdad and southern governorates reliant on gas-fired stations.
Meanwhile, the Iraq Stock Exchange entered a sharp downward cycle amid fears of broader regional confrontation. Market authorities activated a temporary trading halt mechanism on any stock falling 5 percent within a session in an effort to contain rapid losses. Preliminary estimates within financial circles suggest that, should escalation continue, some shares could lose more than 20 percent of their value over the course of the week.
The Coordination Framework Crisis
Against this intertwined backdrop, a source within the Coordination Framework says that the Shi’a forces find themselves at an unprecedented moment of political embarrassment, one they did not enter with fully calibrated calculations.
For months, Iraq has been navigating internal division, a caretaker government, and mounting fiscal pressure. Recent tax and financial measures were introduced in an effort to contain the deficit and stabilize the exchange rate. The assassination of Ali Khamenei, the source argues, has now exposed that fragility to a direct regional test.
What occurred in Iran, the source adds, cannot be separated from Iraq’s internal balance. Much of the political equilibrium in Baghdad evolved under a relatively stable Iranian equation. A shift at the apex of power in Tehran reopens longstanding questions: the structure of influence, relations with armed factions, and the threshold of confrontation with the United States.
Despite the escalatory rhetoric that surfaced in the first hours, the source maintains that most Shi’a forces within the Framework are, in practice, inclined toward de-escalation with Washington, even amid broader regional escalation.
Pragmatism, he suggests, ultimately governs decisions when political positioning collides with the preservation of power. As precedent, he points to the withdrawal by multiple forces of Nouri al-Maliki’s candidacy for the premiership after US opposition, when key actors concluded that direct confrontation with Washington carried a higher cost than recalibrating alliances.
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“Everything will change.”
A senior figure within Iraq’s Shi‘i Coordination Framework said quietly.
The assassination of Ali Khamenei at dawn on 28 February 2026, in a large-scale US–Israeli strike on Tehran, was never going to remain an Iranian event. Within hours, the region shifted.
US President Donald Trump publicly confirmed the killing as US and Israeli strikes continued inside Iran, followed by Iranian missile and drone retaliation. Escalation was no longer rhetorical. It was operational.
Iraq found itself immediately inside the equation — by geography, by political alignment, by armed networks tied to Tehran, by the presence of US forces on Iraqi soil, and by an oil-dependent economy linked to Gulf export routes now shadowed by instability. For several hours, Baghdad’s political class was suspended. According to a source inside the Coordination Framework, conflicting reports circulated deep into the night. Some insisted Khamenei had survived. Others refused to react until confirmation arrived. When the death was verified, something shifted. WhatsApp groups where politicians habitually debate policy fell silent. Messages reduced themselves to elegies for the “Supreme Leader.”
According to the same source, a post-Khamenei era will inevitably re-order influence inside Iraq. Over the past two decades, many political actors built their leverage through relatively stable and direct relationships with Iranian decision-making centres. A rupture at the top of that system destabilises those channels. “Some players see this as a moment to reposition,” the source said. “Others treat it as a period of deep uncertainty that requires caution.”
Official Mourning and Calibrated Fighting
At the official level, the Iraqi government declared three days of national mourning and described the assassination as a “flagrant aggression and a condemnable act that violates all humanitarian and moral norms,” according to a statement issued by the office of the outgoing Prime Minister Mohammed Shia Al-Sudani. The statement came swiftly, carried a clear condemnation, and called for an end to the war and escalation.
In Baghdad, crowds gathered near the Suspension Bridge leading to the Green Zone. Protesters attempted to reach the vicinity of the US embassy, but the roads leading to the fortified area were closed, security reinforcements were deployed, and water cannons and tear gas were used to disperse the demonstrators.
Central and southern governorates witnessed similar protests and gatherings, where images of Khamenei were raised and calls were made to avenge him, while an official holiday was declared in Basra and Dhi Qar, and a number of other governorates.
Further, factions operating under the name “Islamic Resistance in Iraq” announced the execution of operations against US targets inside Iraq and in the region. Among the most prominent of these factions are Kataib Hezbollah, Harakat Al-Nujaba, and Kataib Sayyid Al-Shuhada. The strikes targeted the vicinity of Erbil International Airport, Balad Air Base north of Baghdad, sites in Basra, and Imam Ali Base in Nasiriyah.
In contrast, the area of Jurf Al-Sakhr north of Babil was subjected to US–Israeli strikes that resulted in the deaths of members of Kataib Hezbollah. In Nineveh governorate, the headquarters of the 50th Brigade affiliated with the Popular Mobilization Forces was targeted by five drones, two of which were shot down before reaching the target. The Popular Mobilization Forces later announced the death of four members of the 41st Brigade affiliated with Asaib Ahl Al-Haq in an attack it described as a “Zionist aggression” that targeted a headquarters in the subdistrict of Al-Wajihiya in Diyala governorate. Asaib Ahl Al-Haq, a faction that has not yet announced its involvement in the war, organized funeral processions for the four individuals.
Despite the expansion of regional escalation, the level of attacks inside Iraq remained controlled within a set ceiling, as no large waves of rockets were launched, nor were operations carried out targeting foreign centers of a civilian nature.
A source within the Coordination Framework says some political actors are keen to preserve a margin of maneuver for armed factions, space that would allow them to recalibrate if regional dynamics shift. This could include a de-escalation similar to the one that followed the height of the war in Gaza, when Iraqi factions suspended their operations after weeks of attacks.
However, sources close to the factions say the current confrontation differs in both context and stakes. One such source indicated that the factions are considering targeting areas where US forces are present inside Iraq — including bases in Erbil — as well as carrying out operations beyond Iraq’s borders, among them the potential use of drones against targets in the UAE.
This trajectory, the source suggests, would place Iraq before further regional complications, widening the scope of diplomatic and security repercussions beyond the domestic arena.
According to the same source, the government’s assurances that Iraq would not be drawn into the conflict began to erode from the first moments of escalation. “Sites affiliated with the factions are being shelled continuously,” the source said, “and drone launch platforms are tracked and struck as soon as they are detected.”
Iraqi Oil Exports Under Threat
The most consequential development unfolded in the Strait of Hormuz, the maritime corridor through which nearly one-fifth of global oil trade passes. Iranian state television, IRIB, announced the targeting of an oil tanker that had attempted to cross despite warnings, claiming the vessel was sinking. The European EUNAVFOR Aspides mission reported that ships had received notices prohibiting passage. Reuters, citing commercial sources, indicated that shipments of crude and fuel had been suspended, while Iran’s Fars News Agency reported that tanker transit had stopped altogether.
For Iraq, the strait is not a distant flashpoint but the primary artery of state revenue. More than three million barrels per day are exported through Basra’s ports, accounting for over 90 percent of public income. Continued production in southern fields such as Rumaila, West Qurna, and Majnoon does not ensure sustained exports if navigation is disrupted. Iraq’s oil system relies on direct pumping to ports with limited storage capacity, leaving little buffer to regulate short-term shocks. A prolonged closure would likely force gradual production cuts and place immediate pressure on salary payments and operational spending.
In the Kurdistan Region, Norway’s DNO and the UAE-based Dana Gas suspended part of their output at Tawke, Peshkabir, and Khor Mor, removing roughly 200,000 barrels per day from the market, around 5 to 6 percent of Iraq’s total exports. While significant, this remains limited compared to the systemic impact of disruption in the south.
The Iraqi Ministry of Oil convened an emergency meeting to examine mechanisms for maintaining exports and fulfilling contractual obligations, as marine insurance premiums and tanker fees rose to record levels. Any sustained increase in transport costs would directly reduce net revenues, which are already strained by a deficit in covering state operational expenses.
Caretaker Foreign Minister Fuad Hussein warned that continued escalation would deepen energy market disruptions and undermine global market stability.
Iraqi Markets in Disarray
In local markets, the dollar climbed in the parallel exchange market on the morning of 1 March to between 157,000 and 157,500 dinars per 100 dollars — an increase of nearly 6 percent within days. The fluctuation carries immediate implications in an economy heavily dependent on imports to meet the bulk of consumer demand.
Annual trade between Iraq and Iran is estimated at between $12 and $15 billion, covering foodstuffs, agricultural goods, and construction materials. Any disruption in cross-border transport — or further volatility in the dollar exchange rate — translates directly into higher prices in Iraqi markets.
The electricity sector presents another point of vulnerability. Iraq imports between 40 and 50 million cubic meters of Iranian gas per day, supporting the generation of roughly 7,000 to 8,000 megawatts, nearly one-third of actual output. Disruptions to these supplies have already manifested in longer power outages, particularly in Baghdad and southern governorates reliant on gas-fired stations.
Meanwhile, the Iraq Stock Exchange entered a sharp downward cycle amid fears of broader regional confrontation. Market authorities activated a temporary trading halt mechanism on any stock falling 5 percent within a session in an effort to contain rapid losses. Preliminary estimates within financial circles suggest that, should escalation continue, some shares could lose more than 20 percent of their value over the course of the week.
The Coordination Framework Crisis
Against this intertwined backdrop, a source within the Coordination Framework says that the Shi’a forces find themselves at an unprecedented moment of political embarrassment, one they did not enter with fully calibrated calculations.
For months, Iraq has been navigating internal division, a caretaker government, and mounting fiscal pressure. Recent tax and financial measures were introduced in an effort to contain the deficit and stabilize the exchange rate. The assassination of Ali Khamenei, the source argues, has now exposed that fragility to a direct regional test.
What occurred in Iran, the source adds, cannot be separated from Iraq’s internal balance. Much of the political equilibrium in Baghdad evolved under a relatively stable Iranian equation. A shift at the apex of power in Tehran reopens longstanding questions: the structure of influence, relations with armed factions, and the threshold of confrontation with the United States.
Despite the escalatory rhetoric that surfaced in the first hours, the source maintains that most Shi’a forces within the Framework are, in practice, inclined toward de-escalation with Washington, even amid broader regional escalation.
Pragmatism, he suggests, ultimately governs decisions when political positioning collides with the preservation of power. As precedent, he points to the withdrawal by multiple forces of Nouri al-Maliki’s candidacy for the premiership after US opposition, when key actors concluded that direct confrontation with Washington carried a higher cost than recalibrating alliances.
