Following the U.S.-launched 2003 invasion of Iraq, the situation deteriorated and by 2007 the conflict between Iraqi Sunni and Shi'a factions was described by the National Intelligence Estimate as having elements of a civil war. In a January 10, 2007 address to the American people, President George W. Bush stated that "80% of Iraq's sectarian violence occurs within of the capital. This violence is splitting Baghdad into sectarian enclaves, and shaking the confidence of all Iraqis." Two polls of Americans have found that between 65% to 85% believe Iraq is in a civil war. However, a similar poll of Iraqis found that 61% did not believe that they were in a civil war.

In October 2006, the Office of the United Nations High Commissioner for Refugees (UNHCR) and the Iraqi government estimated that more than 365,000 Iraqis have been displaced since the 2006 bombing of the al-Askari Mosque, bringing the total number of Iraqi refugees to more than 1.6 million. By September 2007, the UNHCR raised the estimate of refugees to a total of about 4.4 million (~15% of the population). The number of refugees estimated abroad was 2.2 million (a number close to CIA projections ) and the number of internally displaced people was 2.2 million.

According to the 2007 Failed States Index, produced by the Carnegie Endowment for International Peace's Foreign Policy magazine and the Fund for Peace, Iraq moved from the world's fourth most unstable country in 2006 to the world's second most unstable country in 2007. A poll of top U.S. foreign policy experts conducted in 2007 showed that over the next 10 years, just 3% of experts believe the U.S. will be able to rebuild Iraq into a beacon of democracy and 58% of experts believe that Sunni-Shiite tensions will dramatically increase in the Middle East.