WATCH: Will Iran shape Iraq's next government?
The newly formed alliance between Iraq's populist Shiite cleric and an Iran-backed coalition is seen as a setback for hopes that last month's elections may have steered the country away from sectarianism.
Both Moqtada Al Sadr's Sairoun and Hadi Al Amiri's Fatah blocs won first and second place in May's elections, which has been marred by allegations of fraud and voter rigging.
"The formation of a new Shia superbloc is predictable, but nonetheless represents a missed opportunity to do something new – a diverse majority government in which some Shia blocs are excluded – and a return to something familiar, the Shia megabloc," Michael Knights, Iraq expert at the Washington Institute told The National.
Mr Al Amiri, a fluent Farsi speaker, is Iran’s closest ally in Iraq, having spent two years in exile there during the era of former dictator Saddam Hussein.