A heavy dust storm choked Baghdad, adding a sense of claustrophobia while providing the insurgents cover. "They're getting closer and closer," noted veteran security expert Mike Arrighi. Arrighi, who works and lives in the tightly defended Zone, says that this week's barrage shows the same "consistency, intensity and ferocity" of the initial attacks that began almost a month ago. That bombardment tapered off after the first week, as the U.S. military quickly neutralized many Shiite launch sites. But this week's barrage suggested that the militants haven't yet had the fight knocked out of them.

This could turn into a drawn-out siege. Infuriated by recent Iraqi government crackdowns on Shiite militias and criminals in Basra and southern Baghdad, the insurgents in the impoverished neighborhood of Sadr City appear have set their sights on the psychologically important Green Zone. The shelling has killed two American soldiers and two civilians who worked for the U.S. government or military and injured at least two dozen others. In Sadr City, U.S. and Iraqi retaliation has left dozens dead. U.S and Iraqi Army brass say they have crippled the insurgents' ability to fire rockets into the area, but this week's renewed shelling has some worried that the Green Zone may become a new battleground in the struggle for Iraq.

Cornered in their sprawling inburb of about 2.5 million people and stoked by incendiary rhetoric from radical cleric Moqtada al-Sadr, who threatened all-out war against the government of Prime Minister Nuri al-Maliki, the Shiite groups have lashed out at the Zone with heavy mortars and Katyusha rockets. They had few options other than the airborne offensive. Heavy fortifications and massive concrete barriers make small-arms attacks virtually impossible. The ground campaign ordered by Maliki has thinned their numbers. Rigorous security at checkpoints and ever vigilant Zone police patrols have made car bombs, IEDS and suicide bombings much harder to organize. "They have to go over our heads," says a U.S. embassy staffer who requested anonymity.

The recent salvos forced even veteran security consultants to contemplate some drastic measures. "We've looked at a number of contingencies, all the way up to a fall-of-Saigon scenario," says Arrighi, security manager for a construction company. That may be hyperbolic. Certainly, American officials would say so. "The actual number of rockets and mortars is falling, and the number reaching the International Zone [the formal name for the Green Zone] is also falling," says Rear Adm. Greg Smith, outgoing Multi-National Force spokesman. Of about 700 rockets and mortar rounds fired since March 23, about 120 struck the Zone. Ten hit at the height of the shelling, on March 27, according to U.S. military figures, and Iraqi officials say as many as 12 hit the area Sunday, from among the almost two dozen fired across the city. Smith says the recent attacks may seem worse than they were, because "people here were never prepared to be in combat. It certainly brought the war closer, and they had to get used to that. But they are adjusting."

Not all are. A few dozen contract employees left the Green Zone, including about 30 from a company that provides logistics to the American military "who headed straight to the airport" in the first two days of shelling, says the embassy staffer.

Arrighi always tells clients they should worry only when he says they should. "This time I told them, 'I'm not saying it's time to worry, but it is time to think about worrying'." More than 1,000 State Department and military staffers work in the American Embassy, which is housed in Saddam Hussein's former Republican Palace. Most live in trailers on the palace grounds, and many of them began sleeping in the embassy when the bombardments began and have yet to return to their trailer beds. "There have been cots all over the embassy and people sleeping in stairwells and hallways," says a State Department analyst who would not be named discussing embassy matters. Many are afraid to sleep in their cramped metal containers, which are considered flimsy and inadequately protected. The trailers sit next to each other in rows of two, three or more. A rocket destroyed a row of trailers and people were "just freaked out," says the embassy staffer. "If somebody had given me a gun and told me 'five guys are coming to kill you,' that would have been preferable to going to sleep in this tin can not knowing if you're going to wake up," adds the embassy analyst. KBR, the engineering and construction contractor, is hiring more people to sandbag housing areas at the embassy in response to an embassy request, according to a company memo. The company asked for volunteers to help with the sandbagging and said that the project will now be completed by June rather than October. The number of heavy concrete barriers, called T-walls, will also be increased.

Meanwhile, diplomats are taking no chances. As the attacks continued into Monday afternoon, with a projectile apparently landing near the U.S. Embassy grounds, staffers there were issued a memo discouraging them from driving around the Zone and recommending that they keep "Personal Protective Equipment" readily available in living quarters. "Personnel should minimize time outside as much as possible," the memo said. "… It is recommended you spend as much time as possible in hardened facilities with overhead cover. It is also recommended that you sleep in hardened facilities with overhead cover … If you decide to sleep in your trailer, please remember that your ability to quickly react could save your life."

Iraqis say Green Zone safety was always more a mirage than an oasis. They've remained susceptible to killings, kidnappings and threats from those who see their very presence in the Zone as a traitorous collaboration with the enemy. But the recent escalation has rattled even the most stoic. Khairiya Mousa Jafar, headmistress of Al-Elaf Girls' Secondary School, says it has had "a great psychological effect" at the 150-student facility. The kids are scared. "You cannot tell when or where it's going to hit," she says. "But, you know, it makes us share the suffering that happens in other parts of Baghdad." At the Master of Prices supermarket in the Al-Qadisiya apartment block, Iraqi civilians, police and expats still shop for groceries. The manager, Najim, says people stay indoors more. He used to buy stock from Jamilla market at the entrance to Sadr City, but fierce fighting between Iraqi Army troops and militias has forced him to shop in Karada, across the 14th of July Bridge. That means less profit, but he's not complaining too loudly. "I'm glad to be here in the Green Zone. I prefer a mortar to a car bomb," he says.

U.S. military leaders insist they are striving to make both the Green Zone and Sadr City safer for their inhabitants. Maj. Gen. Jeffery Hammond, who has directed much of the action against Shiite fighters in Sadr City, says he was motivated largely by a desire to take out the brigades that have been shelling the Zone. "I went into Sadr City for the rockets," he says. He says his campaign has succeeded but acknowledges that insurgents could launch rockets from elsewhere. About 80 percent of the mortars and rockets that hit the Zone come in from Sadr City, some 10 miles away. "There is no mistaking the fact that the enemy was using Thawra and Jamilla neighborhoods to fire rockets and mortars out of," says Stover. "They were using school playgrounds, soccer fields, and other open areas. By going into south Sadr City we took the enemy out of his comfort zone. It initially denied him his point of origins sites for their rocket and mortar attacks. The attack last night did not occur from those POO sites. Though it did come from Sadr City."

U.S. military officials have been careful when identifying the militants, reluctant to finger Moqtada al-Sadr's Jaish al-Mahdi, or Mahdi Army, because they still hope the radical cleric will avoid a full-scale war and instead seek a political solution. They employ a different lexicon altogether. "We believe these criminal activities are the work of special groups," Stover says. "We define special groups as those who are not in compliance with Moqtada al-Sadr's freeze. They are involved in kidnapping, murder, intimidation, smuggling, EFP [explosively formed projectiles], and indirect fire [rockets and mortar] attacks against the [Iraqi government], Iraqi people and their security forces and U.S. soldiers - in short they're criminals. Common thugs most cases - along the lines of organized crime. They have different cells, with different criminal specialties."

Even as the sandstorms hindered the military's ability to strike back at the attackers, U.S. military leaders said they were confident that Zone warning procedures, which include sirens, are effective. "This is still the safest piece of the battlefield many of us have served," says Army Col. Jerry O'Hara. Indeed, it should get safer for embassy employees, who will soon move to new quarters. The State Department last week certified as ready for occupancy the mammoth new embassy complex—including more than 25 salmon-colored buildings—on 104 acres along the Tigris River. The largest U.S. embassy in the world, it will come in at a cost of more than $700 million, compared with its original price tag of $592 million. Some staffers have already been sleeping there, authorized by Ambassador Ryan Crocker, who acted at the height of the Green Zone attacks last month. Both Crocker and Lt. Gen. Raymond Odierno, nominated to succeed Gen. David Petraeus as U.S. commander in Iraq, are expected to have their headquarters in the new complex. At just the time some U.S. personnel are getting queasy about their tenure in Baghdad, the State Department also warned American diplomats that they may be required to work in Iraq in 2009 if not enough people volunteer to fill openings. "That should go over well here, given recent events," says a current embassy staffer.

Before the Easter Sunday assault, residents jogged, biked and drove around the Zone, negotiating checkpoints with patience and even good humor. They sunned themselves at Liberty Pool, once the domain of Saddam and his posse, popped into Freedom House for spaghetti and conversation, walked to work listening to downloaded music on their iPods. Arrighi regularly hosted pizza night at his office/home, teasing guests with the recipe his mother passed to him. In recent weeks most have grown more circumspect, not sure when or where a rocket might land. Some make sure they know where duck-and-covers are located, although they're not sure it makes sense to abandon their cars and seek cover. "This is very unnerving," says Arrighi. "But then, this is not the Emerald City. If you are terrified about being here and think you should leave, you probably should." For many here, though, that's not an option.