Iran’s ongoing missile and drone strikes on the Kurdistan Region of northern Iraq, exceeding 1,000 attacks since February 2026 and continuing through late September, form the central driver of trader assessments for markets on Iranian targeting of Iraq. These operations have focused on Iranian Kurdish opposition camps and select sites linked to U.S. presence, with fresh incidents reported near Erbil and Soran in the final week of September. The completion of the U.S. troop withdrawal on September 30 has heightened concerns over the Kurdistan Region’s lack of independent air defenses, while Iran-backed Iraqi militias resist full disarmament timelines now extended into 2027. Diplomatic contacts between Baghdad and Tehran, including discussions on border security and limited flight resumptions, alongside broader U.S.-Iran de-escalation talks, provide counterbalancing channels that could limit further escalation within any specific resolution window.