Israeli defense officials are closely tracking Iranian-backed Shia militias in Iraq, including Kataib Hezbollah and other Popular Mobilization Forces groups, amid Baghdad’s delayed disarmament deadline tied to the U.S. troop withdrawal scheduled for September 30, 2026. These factions have launched repeated drone and missile strikes toward Israel and U.S. positions since the start of the 2026 Iran conflict in February, prompting Israeli warnings that responses would intensify without restraint. Revelations in May 2026 about prior Israeli forward sites in western Iraq, which triggered clashes with Iraqi forces in March, have heightened Baghdad’s condemnation and militia rhetoric about potential escalation. Traders weigh the risk of militia attacks after the U.S. exit against Israel’s established pattern of preemptive or retaliatory strikes on proxy targets in the region.