Iraq has appointed a new prime minister and president nearly six months after its November 2025 elections, placing the country at a critical juncture in its relationship with the United States. While the United States Embassy in Baghdad welcomed Prime Minister-designate Ali Al-Zaydi and expressed hope for a stable and prosperous future, Washington simultaneously announced new financial rewards for information on leaders of Iranian-backed militias accused of attacking American personnel and Iraqi Kurdistan.

Despite these measures, there is little indication that the militias have been curtailed. Some of their leaders continue to appear publicly, and major groups remain active without facing broad new sanctions. This raises questions about how the United States will balance diplomatic engagement with Baghdad against efforts to counter Iranian influence and protect its interests in Iraq.

Uncertainty also surrounds future American funding in Iraq, particularly support for Kurdish Peshmerga forces in the north. Although the United States plans to allocate $118 million to partner forces in Iraq under its restructured Counter Islamic State Train and Equip Fund, the Kurdish regional defense ministry is set to receive no direct funding in the proposed 2027 budget. Kurdish officials and several members of Congress have voiced concern that this shift could weaken a longstanding ally and undermine regional stability.

As the United States reduces its military footprint in neighboring Syria and reassesses its broader strategy, policymakers face mounting debate over whether continued funding for Iraq is justified given Baghdad’s close ties to Iran. The formation of the new Iraqi government now presents a pivotal test for future relations between the two countries.