ISIS is reportedly marching on the key Iraqi city of Ramadi—upending the momentum the U.S.-led military coalition seemed to have just days ago, and threatening to shatter an already delicate recent power shift that both the U.S. and Iraq hoped to exploit.

Until Wednesday’s reports about Ramadi both U.S. and Iraqi officials were examining what effects ISIS’s recent losses could have in future battles. The officials were even talking about where they would take down ISIS next. During his visit to Washington, Iraqi Prime Minister Haider al Abadi suggested in an interview Wednesday with reporters that his troops could move on both Anbar Province—where Ramadi in the local capital—and the oil-rich city of Baiji.

But that was before, according to residents, three cities near Ramadi fell into ISIS hands. Hours later, area security forces reportedly asked for more support from the central government to retain control of the city. Pentagon officials stopped short of saying the city was on the brink of falling. But they didn’t sound confident it would hold, either.

“The situation in Ramadi remains fluid and, as with earlier assessments, the security situation in the city is contested. The ISF [Iraqi Security Forces] continue to conduct clearing operations against ISIL-held areas in the city and in the surrounding areas of Al Anbar province,” U.S. Central Command spokesman Army Major Curt Kellogg said in a statement, using the government’s preferred acronym for ISIS. The coalition continues to coordinate with ISF forces and provide operational support as requested.”

Ramadi was the scene of fierce battles between Iraqi and U.S. troops during the U.S. war there. And it was key in the Sunni Awakening of 2007 when Sunni tribal leaders agreed to reconcile with U.S. forces and the Iraqi government.

Iraqi and ISIS forces have battled in Ramadi for months during the current war, and ISIS already controls parts of the city. There have been several reports in the past that the rest of the city had fallen, only to turn out to be false. Overnight, the U.S.-led coalition has struck “two ISIL tactical units and destroyed an ISIL armored personnel carrier,” according to press release from U.S. Central Command, which is responsible for U.S. operations in the region.

“It is a tough fight right now,” a second defense official said.

Local reports suggested fierce fighting and crowded hospitals, with beds occupied by civilians. But whether the city eventually falls of not, this ISIS offensive has upset U.S. planning for the war in Iraq.

ISIS’s loss of the central city of Tikrit this month shifted the balance of power in Iraq. And those changes in ground control in the last few weeks offered both benefits and new challenges against the battle against ISIS, defense officials told The Daily Beast.

Where the terror group once swept through the country, the loss of Tikrit suggested it could not defend a key stronghold. On Monday, Pentagon officials, buoyed by ISIS setbacks, announced that ISIS lost 25 percent of its landmass in Iraq since June 2014.

Those losses will impact ISIS’s ability to recruit and retain fighters, according experts and defense officials. Indeed, on Wednesday Army Colonel Steven Warren, a Pentagon spokesman, said the group was resorting to child soldiers in a bid to sustain its forces and that “cracks” were emerging.

The loss of territory also increased the chances of internal fracturing within ISIS’s leadership, said Daveed Gartenstein-Ross, a senior fellow at the Washington, D.C.-based Foundation for Defense of Democracies—presenting the coalition with a chance to turn ISIS against itself.

But Gartenstein-Ross also noted a series of challenges that came with ISIS’s setbacks.

ISIS’s defeat in Tikrit could not have happened without thousands of Shiite militia members, many trained, advised and armed by Iranian Quds force members. When Iraqi and militas forces faltered, the U.S.-led coalition began airstrikes on the condition that Iranian advisers on the ground leave.

But in Ramadi, which sits 70 miles northwest of Baghdad, there is no significant Shiite militia presence. Rather, there’s an Iraqi Security forces that is struggling to fend off the ISIS threat on its own.

Should Iraqi forces appear to only be able to win with the help of militiamen that reportedly looted their communities, it could exacerbate the very same sectarian tensions that led to the rise of ISIS.

“It can increase Sunni resentment and can set the stage of future Sunni resistance against Shiite advancement,” Gartenstein-Ross said. Given that the groups were also backed in some way by Iran “creates risks of perception of regional Shite war.”

And with less territory to control, there could be more ISIS fighters available to move to other areas to “surge them somewhere else or try to capture new territory.”

That’s because the terror group doesn’t appear to have lost many of its forces, even as it lost Tikrit.

U.S. defense officials told The Daily Beast that Iraqi forces confronted little resistance and that few fighters left Tikrit. It suggested that remnants of Saddam Husein’s regime—Baathist party members—were as strong a presence in Tikrit as ISIS. (After all, Tikrit is Saddam’s hometown and a Baathist stronghold.) Baathists and ISIS have increasingly worked together in Iraq even as they have varied goals: While Baathists are Iraqi secular nationalists seeking a return to power, ISIS wants a regional, ultra-religious caliphate.

What remains unclear is whether the loss of territory will create a stronger or weaker alliance between the two groups.

As government opponents, like ISIS and Baathists, lose ground, they could find themselves increasingly working together, said Christopher Harmer, a senior naval analyst with the Middle East Security Project at the Institute of the Study of War.

“As ISIS starts to lose territory, they will need top-end military strategic campaigning that the Baathists will bring and ISIS doesn’t have,” Harmer said.

But Gartenstein-Ross said it could also weaken the relationship.

“It might create stronger alliance or it might cause them to ditch ISIS,” he said.

All those assessments are subject to change should Ramadi fall into ISIS hands.

“If ISIS gets 10 to 15 percent more [of Ramadi] is less of an issue,” a second defense official explained. “If they cut off major communication or supply routes, that would really changes things.”

One of those possible changes: how much military hardware the Obama administration is willing to devote to the fight. Suggestions of the fall of Ramadi come as Abadi is pushing the U.S. for both weapons and intelligence—and to take the fight to Anbar next. The potential fall of Ramadi could speed U.S.-led coalition intervention in Anbar.