The seizure of Iraqi cities by insurgents belonging to the Islamic State of Iraq and the Levant (ISIL), an Al-Qaeda offshoot which already controls a large swathe of territory in neighbouring Syria, threatens the stability of the entire Middle East.
More significantly, ISIL's success seriously undermines American claims to have established a unified and competent Iraqi military, a decade after the United States-led invasion and occupation. Unless troops controlled by Iraqi Prime Minister Nouri al- Maliki rally soon, there is a serious danger that northern Iraq may be permanently lost to ISIL.
One hope for Iraq is that although ISIL has attracted some of the region's most experienced fighters, the organisation may have overreached itself.
For Mr Maliki - who draws his support from the Muslim Shi'ite community that accounts for around 60 per cent of Iraq's population - ISIL is the Sunni movement he dreads most, with its vow to kill and expel the Shi'ites. Defeating it is, therefore, a matter of survival.
But even for the Sunni Arabs of Iraq who are bitterly opposed to Mr Maliki, the ISIL threat is existential, for it seeks to destroy local tribal power allegiances.
In Mosul, for instance, the ISIL takeover directly threatens the interests of the most prominent Sunni political family - that of local governor Atheel al-Nujaifi and his brother Usama al-Nujaifi, Speaker of the Iraqi Parliament.
Meanwhile, the Kurds, who have their own, self-governing region in northern Iraq, are equally threatened by the rise of ISIL, which may be tempted to grab Kurdish oil reserves.
The Peshmerga, the Kurds' military formations, are already engaged in battles against the militants. So, it is possible that the threat of Iraq's carve-up may draw the country together against the common ISIL enemy.
But ISIL will have to be pushed back pretty quickly, for if it entrenches its control over the north, from which some 500,000 people have already fled, it will be almost impossible to dislodge.
Any prolonged fighting will also destroy Iraq's economically vital oil industry, whose initial hope of exporting four million barrels a day this year now looks unrealistic. And the longer the fighting continues, the greater the temptation for neighbouring states to jump into the fray.
Turkey is vowing to free its citizens abducted in Iraq's second-largest city of Mosul, even if it requires a military intervention.
Iran - determined to prop up the friendly Shi'ite government in Iraq - will be tempted to send in its weapons and fighters. That, in turn, could prompt big Sunni regional powers such as Saudi Arabia to throw in their lot with any Sunni movement capable of confronting both ISIL and the Iraqi government, which the Saudis loathe.
All this presents US President Barack Obama with an unappetising menu of bad choices. He may decide to keep out of the fray, at the risk of seeing an expansion in Iran's military involvement. Or he may order US aid for the Iraqi military, a move which will be interpreted as a tacit admission that his initial 2011 decision to withdraw all US troops from Iraq was a grave miscalculation.
Either way, the worst nightmare for the Middle East - the grim spectacle of an arc of instability including Iraq, Syria and Lebanon and pitting Sunni and Shi'ite Muslims in epic proxy wars - looks perilously close to reality.
This article was first published on June 13, 2014.
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