A suspected Iranian drone strike has halted production at Iraq's Khor Mor gas field, one of the largest in the Kurdistan region, knocking out nearly 2.8 gigawatts of power generation in what appears to be a significant escalation in the regional fallout from the Iran war.

Two security sources told Reuters that a drone targeted the field on Sunday evening, with smoke seen rising from the site in Chamchamal, Sulaymaniyah province. An engineer at the field said a gas storage facility was hit, and all crew were ordered into shelters for fear of further attacks.

The Kurdistan region's electricity ministry said nearly 2.8 gigawatts of generating capacity was lost from the grid. With the region normally producing around 4 gigawatts, roughly two thirds of its power supply was taken offline, leaving households and businesses facing outages. The size of the shortfall reflects how central the field is to the region's power system: Khor Mor's gas feeds the local power plants that underpin the grid, so damage at the site translates directly into lost generation capacity.

No group has claimed responsibility for the strike. Suspicion has fallen on Iran or its allied militias in Iraq, which have carried out repeated missile and drone attacks on the Kurdistan region since the war began. Kurdish authorities have long blamed Iran-backed armed groups for strikes on Khor Mor, and the field has been hit many times in recent years, including an attack in November last year that also halted production.

The timing of the attack stands out. It came only hours after US President Donald Trump said renewed US military action against Iran was highly unlikely as long as talks over Tehran's nuclear programme and the Strait of Hormuz made progress (see earlier: Trump says new Iran strikes 'highly unlikely' five times — but three carriers stay ready). Hours later, a suspected Iranian drone had knocked out most of Kurdistan's power supply — a reminder that the region's energy infrastructure remains a live target whatever the diplomatic mood.

If Iranian involvement is confirmed, the strike would suggest that Tehran or its proxies are still prepared to hit regional energy infrastructure even as diplomatic contacts pick up, undercutting the de-escalation tone of Trump's latest remarks.

Khor Mor is operated by Pearl Petroleum, a consortium that includes UAE-based Dana Gas and Crescent Petroleum. Its gas feeds power plants in the Kurdistan region rather than export markets, so crude and LNG balances are largely untouched and the direct effect on global supply is limited.

The bigger signal for oil is that energy infrastructure in the region is still being targeted while diplomacy is supposedly picking up. That dynamic supports the war-risk premium in crude — the added cost markets price in for the risk of supply disruption — and traders will be watching for any confirmed Iranian link, or a US response, that could revive escalation risk around Gulf supply routes.

Pressure on Iraq is also building from Washington. Iraq's foreign minister said the US Treasury has asked Baghdad to close all but two of its border crossings with Iran, as part of a wider push to tighten economic pressure on Tehran.

Attention now turns to how quickly production at Khor Mor can be restored, whether responsibility for the strike is formally assigned, and how Washington responds to an attack that cuts across its message of restraint.