Iraqi military seals off Green Zone amid heavy gunfire near US Embassy

Baghdad’s Green Zone, the heavily fortified district housing foreign embassies and government buildings, has been sealed off by Iraqi military forces following reports of heavy gunfire near the US Embassy compound.

A familiar pattern of escalation

In March, missiles struck a helipad inside the US Embassy compound itself. That March attack was part of a broader string of assaults that included drone strikes and rocket attacks on the compound. Some of those incoming threats were intercepted by air defense systems, but the ones that got through left visible flames and smoke rising from the embassy grounds.

No injuries were reported during the March incidents. The Green Zone is a roughly four-square-mile enclave in central Baghdad, ringed by blast walls and checkpoints, originally built to house the Coalition Provisional Authority after the 2003 invasion.

Who’s behind the attacks

The attacks have been widely attributed to Iran-backed militia groups operating inside Iraq. The Green Zone faced significant threats in 2023, and the pattern of attacks has persisted for years. What changes is the intensity, which tends to spike during periods of heightened geopolitical friction between Iran and the US.

The US has previously conducted strikes against Iran-aligned militias in response to these attacks, creating a cycle of provocation and retaliation. Some of the militia groups targeting the Green Zone are aligned with political parties that hold seats in parliament.

What this means for markets and investors

Iraq remains one of the world’s largest oil producers, and sustained threats to diplomatic compounds signal a broader deterioration of the security environment that can ripple through global supply calculations. Defense sector stocks also tend to respond to sustained instability in the region, flowing through to companies in the aerospace and defense supply chain.

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