Ever since its revolution in 1979, Iran has cultivated a network of proxies and friends throughout the Middle East. For years, this strategy proved successful. Slowly but surely, Tehran’s “axis of resistance” gained influence in Iraq, Lebanon, and Syria, where it railed against Israel and the United States. In September 2014, Iran-backed Houthi militants captured Yemen’s biggest city. Shortly thereafter, an Iranian parliamentarian boasted that his government controlled four Arab capitals: Baghdad, Beirut, Damascus, and Sanaa.

But events over the past year have upended the regional order. Today, Iran has largely lost control of two of those four Arab capitals. Israel’s war in Lebanon has decimated Hezbollah, the Tehran-backed militant group that dominated Beirut. In December, Turkish-backed Sunni forces wrested control of Damascus from Bashar al-Assad’s regime, an Iranian ally that had controlled Syria for half a century. Now, the Islamic Republic is terrified that another domino might fall.

Iraq is the most likely place for that to happen. Security forces in Yemen and in Iran itself appear strong and brutal enough to maintain control of their own populations. But Tehran’s lackeys in Iraq are getting nervous. Iran-backed Iraqi militias attacked U.S. forces and Israeli targets regularly throughout 2024, killing three U.S. soldiers in a drone strike in March of that year. But these militias appear to have changed course. They have not launched a strike since early December—a sign that they are growing more fearful of attracting Washington’s attention.

Iraq’s politicians also seem more eager than usual to appease the United States. Iraq’s government is led by Prime Minister Mohammed Shia al-Sudani and his Coordination Framework, a coalition closely allied with Iran. But Sudani’s team made three compromises with U.S. officials in late January: removing an arrest warrant on U.S. President Donald Trump for ordering the killing of terrorists in Baghdad during his last administration; agreeing to release the Princeton researcher Elizabeth Tsurkov, who has been held hostage by Kataib Hezbollah, an Iran-backed militia; and passing a vital budget amendment that has long been sought by Iraq’s Kurds, the segment of Iraqi society that has the closest ties to Trump. These compromises indicate that Iran’s allies in Iraq are feeling vulnerable.

Washington should take advantage of this moment to permanently reduce the level of Iranian control in Iraq. It should do so not through wide-scale military action but with tough diplomacy, the threat of sanctions, and intelligence operations. Such measures would deprive Iran of a vital source of funding and give the United States leverage in any negotiations with the regime’s leaders. Most important, it would lead to better governance for Iraqis, who have suffered for too long under Iran’s thumb.

Tehran is desperate to hold on to Iraq, in part because the........

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