Iran-Backed Militias Escalate Attacks on Iraq’s Oil Infrastructure, Threatening Energy Security and Foreign Investment

Iran’s Proxy War Targets Iraq’s Oil Sector Amid Regional Tensions

While global attention remains fixed on the Strait of Hormuz, Iran-backed militias in Iraq have escalated attacks on the country’s oil industry, a sector that generates 90% of Iraq’s federal revenue. These assaults, carried out by a network of armed groups loyal to Iran’s supreme leader, threaten to cripple Iraq’s energy infrastructure, deter foreign investment, and prolong economic instability.

Iran’s Militia Network: A Web of Influence in Iraq

At the heart of these operations is a coalition of six U.S.-designated terrorist organizations, including groups like Kata’ib Hezbollah and Asa’ib Ahl al-Haq. These militias, though operating under the guise of Iraqi security institutions, serve Iran’s strategic interests by challenging American and Western presence in the region. Since the escalation of the U.S.-Israel-Iran conflict, these groups have conducted hundreds of attacks, many targeting Iraq’s energy sector.

Direct Strikes on Kurdistan’s Oil Fields

The militias have repeatedly targeted oil fields in the Kurdistan Regional Government (KRG), a semi-autonomous region with close ties to Washington. In early March and April 2026, drones struck Sarsang field, operated by the American company HKN Energy, forcing a temporary suspension of production. The attacks also damaged the Lanaz Refinery, majority-owned by Kurdish political elites, further straining relations between Baghdad and Erbil.

Federal Iraq Under Siege: Attacks on National Refineries and Foreign Operations

Iran’s proxies have not spared Federal Iraq. In early April 2026, a coordinated drone attack targeted oil facilities, including the Baiji refinery, Iraq’s largest, and infrastructure linked to foreign operators. At least two fields had been struck in prior incidents, signaling a pattern of sustained aggression. A drone also crashed near a facility owned by PetroChina, a subsidiary of China’s state-owned CNPC, in late March, and another attack hit storage facilities at the Buzurgan oilfield, where a Chinese state-owned company leads development.

Economic Fallout: Investor Confidence at Risk

The damage to Iraq’s oil infrastructure could take years to repair, with long-term consequences for investor confidence. Mohammed Shia al-Sudani, Iraq’s caretaker prime minister following the November 2025 elections, has sought to attract Western—particularly American—investment to modernize the sector. However, the ongoing attacks threaten to undermine these efforts, risking a shift toward greater energy dependence on Iran and lost opportunities for U.S. and allied companies.

"Even once these attacks stop, it will take years to repair the damage and reassure investors. A disruption in American and Western investment would be devastating for the Iraqi energy sector, which needs support to develop and modernize."

Geopolitical Implications: Energy Security and Regional Stability

The attacks underscore Iran’s strategy to destabilize Iraq while avoiding direct confrontation. By targeting critical infrastructure and foreign operators, Iran’s proxies aim to weaken Iraq’s economy, deter Western investment, and reinforce its own influence in the region. The international community’s response will be crucial in determining whether Iraq can recover its energy sector—or succumb to deeper economic and political reliance on Tehran.