Iran-backed Shia militias launched coordinated drone and missile attacks overnight against Iraqi Kurdish officials and US military and diplomatic facilities in Erbil and Baghdad, marking one of the most intense periods of violence since hostilities erupted last month. Explosions rocked the capital of Iraqi Kurdistan, striking the US consulate and military base, while residential areas in Baghdad and a US facility at the capital's airport also came under fire. Iraqi security officials indicated suspected US counter-strikes targeted militia facilities across Iraq on Saturday and Sunday.

This escalation follows heightened tensions in the Middle East, with Iran accusing the US of pursuing talks while allegedly preparing for invasion. The attacks underscore the volatile security situation in Iraq, a key US ally and a critical node for regional stability. The violence threatens to further destabilize the country, already grappling with internal divisions and the fallout from the broader regional conflict.

The immediate market implications focus on potential disruptions to oil supplies and energy markets. Iraq is a significant OPEC producer, and any sustained instability could raise global oil prices. Investors are likely to monitor the situation closely for signs of broader conflict spreading, which could impact energy stocks and increase risk premiums across markets. The situation remains fluid, with the risk of further escalation posing a clear threat to regional and global economic confidence.