Israel maintains heightened vigilance toward Iran-backed Shia militias in Iraq amid the ongoing regional conflict, with Israeli officials recently stating that Baghdad bears responsibility for attacks launched from its territory and reserving the right to respond. The most immediate catalysts include the U.S. troop withdrawal scheduled for September 30, 2026, and Baghdad’s parallel deadline for militia disarmament, which pro-Iran groups have rejected pending further talks. These groups have conducted drone and rocket strikes on U.S. and Israeli-linked targets since February 2026, prompting Israeli airstrikes on militia infrastructure earlier in the year and prior revelations of temporary Israeli forward sites in western Iraq that led to clashes with Iraqi forces. Traders weigh the risk of direct Israeli strikes—such as airstrikes or missile attacks qualifying under market rules—against Baghdad’s efforts to restrain proxies and avoid escalation before the withdrawal completes.