• US-led coalition completes withdrawal from Iraq, handing over security to Iraqi forces.
  • Prime Minister Ali al-Zaidi faces the daunting task of disarming Iran-aligned militias, a key test of his government.
  • Washington bets on Zaidi as a partner amid Iraq's deepening fiscal crisis and regional tensions.

A New Chapter for Iraq

The U.S.-led anti-ISIS coalition formally ended its military mission in Iraq on September 30, marking the conclusion of a 2024 agreement that phased out coalition operations. As the last troops departed, President Donald Trump praised Iraq's new prime minister, Ali al-Zaidi, calling him a "wonderful new prime minister" and signaling Washington's support for the former businessman who took office in May. The withdrawal, however, leaves behind a fragile political landscape and unresolved security challenges that will define Zaidi's tenure.

At a handover ceremony, Zaidi hailed the withdrawal as the start of a "new phase of Iraqi sovereignty," asserting that Iraqi security forces would maintain the fight against Islamic State remnants and that the state would regain exclusive control over weapons. But his government's ability to deliver on that promise is far from assured. Several Iran-aligned armed groups, including Kataib Hezbollah and Harakat al-Nujaba, have outright rejected calls to disarm, complicating efforts to consolidate state authority. Zaidi has already retreated from an earlier September 30 deadline to disarm or dissolve these factions, instead proposing a 90-day pause in militia attacks and a longer-term goal of complete disarmament by June 30, 2027.

The Militia Question

The Popular Mobilization Forces (PMF), an umbrella organization that includes both state-linked and autonomous Iran-aligned militias, remains a central obstacle. Analysts say the blurred arrangement has weakened past attempts to establish a state monopoly on force. "The PMF is a double-edged sword," said one Baghdad-based security analyst, speaking on condition of anonymity. "On paper, they're part of the state, but in reality, many factions answer to Tehran." Zaidi's government, still incomplete with only 14 of 23 cabinet nominees approved, lacks the operational cohesion to enforce compliance. Key ministries, including interior and defense, remain unresolved.

Washington's leverage is limited. The U.S. is shifting its relationship with Iraq from a military framework to economic and diplomatic engagement, but Tehran's influence runs deep. Zaidi, seen as a compromise acceptable to both sides, met Trump in Washington in July and Iranian President Masoud Pezeshkian in Tehran shortly after. That balancing act is becoming harder as the U.S. presses Baghdad to curb Iran-aligned groups. "The Iraqis are walking a tightrope," said a senior U.S. official, who requested anonymity to discuss sensitive diplomacy. "We're watching closely to see if Zaidi can deliver."

Economic Pressures Mount

Iraq's security transition comes amid severe fiscal strain. The country depends heavily on oil exports for public revenue, leaving it exposed to market disruptions. With a bloated public-sector wage bill and limited sovereign wealth buffers, Baghdad may increasingly rely on borrowing to cover deficits. In late September, Zaidi held talks with the IMF, ExxonMobil (XOM), and HKN Energy on fiscal reform, oil exploration, and production—a sign that his government is courting international investment to stabilize finances. But without reliable security, attracting capital will be difficult.

"The economic stakes are enormous," said a former U.S. Treasury official now advising on Iraq. "If Baghdad can't pay its security forces or create jobs, the political compact unravels." Zaidi's reform agenda includes banking-sector reform, anti-corruption measures, and new investment bodies, but implementation will require political capital he has yet to consolidate.

Regional and Domestic Reactions

Baghdad has marked the withdrawal with "Sovereignty Days," framing it as the restoration of national independence. Public sentiment, however, is mixed. Supporters see the departure as the overdue end of a foreign military presence, while critics worry about gaps in intelligence, air defense, and counterterrorism. The memory of the 2011 U.S. withdrawal—followed by ISIS's rise and the 2014 coalition return—looms large. "We've been here before," said a retired Iraqi army officer in Mosul. "The difference now is that ISIS doesn't hold territory, but the militias are stronger than ever."

Internationally, the U.S. is reducing its military footprint while seeking to preserve influence through diplomacy and economic ties. Iran's influence remains a core issue, with several Iraqi factions tied to the Islamic Revolutionary Guard Corps. A failure to restrain militias could draw Iraq into broader U.S.-Iran tensions, even as Baghdad officially seeks neutrality.

The Road Ahead

In the short term, Zaidi must maintain pressure on ISIS networks, prevent militia attacks that could trigger retaliation, and implement the proposed 90-day cessation. His credibility hinges on whether the June 2027 disarmament target is genuine or another postponement. Completing the cabinet and strengthening key institutions will be essential. Longer term, Iraq could either turn the page toward a normal sovereign partnership with the U.S., attracting investment and gradually integrating armed groups, or slide back into dependence on external security support if militias resist and fiscal strains deepen. Trump's praise for Zaidi is less a declaration of victory than a political bet—one that now rests on whether Iraq's new prime minister can convert rhetoric into real control.

Update: This article was updated to clarify that the 90-day pause in militia attacks was proposed by Prime Minister Zaidi, not formally agreed to by all factions.