Beyond the suffering of a population who have already endured decades of conflict, the effects are likely to reverberate around the world.
The most obvious place to start is the price of oil. The country's oil minister Abdul Kareem Luaibi told CNBC that there was no threat to the global oil supply from the conflict on Wednesday. However, with Isis getting closer to Iraq's main oilfields, that may change. On Thursday, Reuters reported that insurgents had surrounded the country's largest refinery, in Baiji.
Turkey in the spotlight
Neighboring Turkey also looks increasingly vulnerable to disruption, which is why the value of the lira has plummeted in recent days, as it looks as though Turkey may shortly have two unstable states (Syria and Iraq) on its borders. A number of Turkish officials were taken hostage by Isis at the embassy in Mosul, and reports suggest truck drivers have also been captured. Turkey's embattled prime minister, Recep Erdogan, is likely to need the support of Kurds in his own country in upcoming elections, so may need to be seen to be protecting the Iraqi Kurdistan region.
"Greater instability in northern Iraq is a credit negative for Turkey given the major trading ties which have developed there over the past few years, while Turkish truck drivers use the Iraqi route via Mosul to get product to the Gulf Co-operation Council and Gulf to avoid Syria which they had been using prior to the civil war there," according to Tim Ash, head of emerging markets research at Standard Bank.
"This also raises significant question marks over oil flows from Iraq and KRG through to Turkey."
- By CNBC's Catherine Boyle.