The Iraqi government of interim Prime Minister Iyad Allawi is facing its first big test as fighting rages in the holy city of Najaf between US forces and militants loyal to radical cleric Moqtada Sadr.
Mr Sadr's Mehdi Army is challenging the new government
BBC News Online asked security experts to give their analysis of the situation and assess how successful the strategy of handling Mr Sadr's insurgency is likely to be.
DR TOBY DODGE,
INTERNATIONAL INSTITUTE FOR STRATEGIC STUDIES, UK
The US military in Iraq today are in an unenviable position. In the aftermath of the transfer of sovereignty on 28 June 2004, their official role is to act in support of the new Iraqi security services.
This matches the political imperative in Washington of keeping US casualties in Iraq to a minimum in the run-up to the US presidential election in November 2004.
This goal of returning US troops to barracks has left large areas of the country without a visible security force.
US and Iraqi government forces have been forced out of Falluja, with the fighters of the insurgency now dominating Ramadi and Samarra and both sides fighting for control of Mosul.
In the south of the country, the government of Iraq and the US army have clearly decided to make a stand in Najaf, the spiritual home of Iraq's majority Shia population.
US and Iraqi troops have been fighting Sadr militia for days
However, Moqtada Sadr's main base of support is not the Shia holy cities, but instead the Baghdad suburb of al-Tharwa (Sadr City).
This slum of up to two million people will become the battleground against Mr Sadr and his Mehdi Army.
US forces have had great difficulty operating here, fighting in crowded and narrow streets, with a lack of local knowledge.
Against the background of a two-front revolt, the security situation in Iraq is steadily deteriorating, with the insurgency's geographic areas of operations growing steadily each day.
There is a real danger that if this situation is not quickly turned around then Iraq's new Prime Minister, Iyad Allawi, will become little more than the mayor of Baghdad.
DR MUSTAFA ALANI,
ROYAL UNITED SERVICES INSTITUTE, UK
The US strategy, as well as the strategy of Mr Allawi's government, is to eliminate Moqtada Sadr's political movement and to disarm and disband his militia.
The aim is not to reach a compromise or another ceasefire which could give Mr Sadr a military and political advantage and enhance his political-religious status.
Therefore, the ultimate objective of this crisis is to defeat Mr Sadr at any price.
Unlike the armed groups operating in Falluja and in other cities of the Sunni triangle, Mr Sadr and his movement are a visible enemy, with a declared political-military agenda which represents a major challenge to US strategy and prestige in Iraq.
The US aim is to disband Mr Sadr's militia
The US strategy is probably going to work, as Mr Sadr enjoys very limited or no support and sympathy among ordinary Iraqis and among the Shia community in Iraq at large, and he has been engaged in bloody conflict with almost all other Iraqi Shia religious and political leaderships.
The present political environment in Iraq could help the US to achieve its objectives.
There should be no change in tactics. The Americans hope that by crushing Mr Sadr's revolt, they will send a clear massage to other armed groups inside the country about the effectiveness of their "iron fist" approach and the determination of the US to stabilise security.
Mr Sadr's political ambition is too big to be accommodated by the new Iraqi government or accepted by the Iraqi Shia community's political and religious leadership.
Without crushing his military power, Mr Sadr could not be part of the new political process.
BROOKINGS INSTITUTION, WASHINGTON, US
I think Prime Minister Allawi is handling the situation extremely well. His government's basic strategy is to make clear that the violence must stop, but at the same time, offer various parties ways to back down and save face...
But the message is not yet being heeded by Mr Sadr, from what we know. I am surprised that he is still testing us and testing Mr Allawi, and that is bad news.
Presumably, he should have already learned that he is not going to win militarily and that US and Iraqi forces around Najaf are capable of just the right balance of refraining from attacks near the mosques, but also being tough and persistent.
Mr Sadr is apparently not heeding the authorities' message
On the other hand, maybe he feels that simply by creating uprisings or allowing them to happen in his name, he elevates his own status in any future Iraqi politics. I just do not know what is motivating him.
But it is true that the current indications are not very good and it may require some more military action before he is persuadable, and perhaps not even then.
There has been a lot of fighting in the last few days - we are not allowing the impasse to go on. The attitude here is not one of leniency.
The implicit message is that any flexibility we are showing now, or that he is showing now, will not last more than days.
But that does not mean an all-out offensive against Moqtada Sadr. I think the approach that we attempted in the last couple of months, when the US was more in charge, worked well.
You basically recognise that you are dealing with a fairly undisciplined group of individuals, and you patiently wait for them to make mistakes or try to move around.
I think that basic approach is the one that we will use again - and Mr Allawi himself and Iraqi forces will choose to employ it.
(Mr O'Hanlon was speaking to the BBC World Service's World Today programme)