"Iraq is close to national elections, and it seems they want to force the government into a corner," said one senior security official on condition of anonymity.
In February, ISIL took control of the Nuaimiya area where the dam is located and began fortifying their positions with concrete blast walls and sand bags, according to anti-government tribal groups who said ISIL claimed the dam on its own.
The ISIL closed all eight of the dam's 10 gates one week ago, flooding land upstream and reducing water levels in Iraq's southern provinces, through which the Euphrates flows before emptying into the Persian Gulf.
Anti-government fighters said ISIL's tactic was to flood the area around the city to force troops to retreat and lift the siege on Fallujah.
"Using water as a weapon in a fight to make people thirsty is a heinous crime," said Oun Dhiyab, a government adviser to the water ministry. "Closing the dam and messing with Euphrates water will have dire consequences."
By Thursday, anti-government fighters had re-opened five of the dam's gates to relieve some pressure, fearing their strategy would backfire by flooding their own stronghold of Fallujah, some 44 miles west of Baghdad.
Iraqi security officials said flooding around the city had already forced many families to leave their homes and prevented troops from deploying or operating properly there in order to stop fighters encroaching on the capital.
"(The fighters) want to use the flood waters to make it difficult for the security forces to deploy in those areas, and this is their chance to move the battle outside Fallujah," said an anti-government leader inside the city.
The Fallujah dam is also key to a number of irrigation projects in the desert province of Anbar, which shares a border with Syria.
In his weekly televised address, Prime Minister Nouri al-Maliki, who held off a full-on ground assault on Fallujah, vowed to exact revenge from the opposition for interfering with the water supply.
"The murderers took advantage of the government policy of utmost restraint in Fallujah ... But it seems the situation has become more complicated and necessitates confrontation," Maliki said.
Two army officers in Ramadi and Fallujah said preparations were underway to launch a quick attack to regain control of the Fallujah dam.
"We are carrying out aerial surveillance to spot militant positions near the dam," said one army officer whose regiment received orders to prepare for mobilizing from Taji, to the north of Baghdad, to Fallujah.
"A military operation could start very soon."