Iraq Situation Report: New PM Zaidi Faces Oil Crisis, KRG Salary Dispute, and PMF Impasse Ahead of Eid al-Adha

As of May 24, 2026, Iraq's political situation remained in a state of managed crisis under PM Ali al-Zaidi's 10-day-old partial government. The four principal open files were: (1) Oil production at approximately 1.5 million bpd — still 66% below pre-Hormuz crisis levels — with the Basra-Haditha diversification pipeline under construction but not operational for at least 18-24 months; (2) The KRG-Baghdad budget standoff over the $110 billion US gas contracts signed May 19, with 1.2 million Kurdish public sector employees facing delayed Eid salaries; (3) The PMF cabinet vacancy crisis, with defense and interior ministries still unfilled and Iran-aligned factions conditioning participation on security sector control commitments; (4) Growing US-Iraq tensions over PMF financial sanctions, the KH terror charges, and the September 2026 military withdrawal timeline. On the security front, ISIS's post-caliphate insurgency continued at a lower but persistent tempo in Anbar, Diyala, Kirkuk, and Salah al-Din provinces, with Iraq's Joint Operations Command running counter-terrorism operations — Operation Swords of Justice — across desert terrain. Zaidi was expected to travel to Najaf to meet Grand Ayatollah al-Sistani and to Erbil for talks with KRG leaders before submitting his remaining nine ministerial nominations, expected after Eid al-Adha (approximately May 26-28).