Baghdad, Iraq ? Cars were honking in celebration as I rode through the streets of the Iraqi capital. The cell-phone message from my Iraqi friend Salaam, after the news of Abul Mousab al-Zarqawi’s death, was ecstatic.

“People are shooting into the air in celebration in Sadr City” (a huge Shiite slum), he said, “and everyone is calling their friends with congratulations. They are slaughtering sheep and giving meat to the poor.”

As the news spread around Baghdad, and I got more jubilant calls, it struck me that the major impact of Zarqawi’s death was psychological. His terrorist group, al-Qaida in Iraq, made up mostly of foreigners, represents only a tiny fraction of Iraq’s insurgents. The vast bulk are ex-Baathists, Iraqi religious fanatics and nationalists, and the U.S. military believes these groups will continue the violence.

But the two 500-pound bombs that put an end to Zarqawi’s wretched life gave hope back to the Iraqi people. And hope is essential if Iraq is to move back from the abyss.

In my six previous trips to Iraq since 2003, I never saw or heard such despair as in the days preceding the death of Zarqawi. The failure of Iraqi politicians to form a government in five months since elections had created a power vacuum that insurgents and criminal gangs used to create chaos in Baghdad. Zarqawi’s group was the most vicious, trying deliberately and with growing success to provoke civil war by slaughtering Shiite civilians and targeting their holiest shrines.

“The situation is hopeless,” I was told by one desperate Iraqi after another. “Our hearts are full of pus,” one told me, saying there was no way to relieve the infection. One lovely young woman, who had worked on the drafting of the Iraqi constitution last year, told me she now had lost hope that democracy would give Iraqis a better future. She said grimly, “Every time I leave my house, I wonder if I will return alive.”

In this poisonous atmosphere, Iraqis had soured on their hapless government and the U.S. presence. Many had come to believe in conspiracy theories that alleged the United States was in cahoots with Zarqawi in order to keep Iraq weak and steal its oil. How else, many asked, was it possible that mighty America could not restore order to Iraq?

Many Iraqi Sunnis, the community from which most insurgents hail, had turned against Zarqawi and were ready to fight him – even in restive Anbar province. But Zarqawi’s men were assassinating Sunni sheikhs and religious leaders who wanted to participate in the political process. Sunni politicians talked bitterly of the U.S. inability to protect these leaders.

If the Americans couldn’t or wouldn’t stop assassinations by Zarqawi’s men in places like Fallujah – which U.S. troops leveled and still control tightly – what chance did the locals have?

Zarqawi’s death provides a break from that unrelieved gloom and a hint that security might improve someday. “The Zarqawi killing will really boost morale and will show that no one is immune to punishment,” I was told by Iraqi Foreign Minister Hoshyar Zebari, as he fielded two bleating cell phones pouring forth an endless stream of interview requests.

“It is a blow to al-Qaida, and even to the Baathists,” Zebari added. “This doesn’t mean the end of the violence, but it will give the public more confidence and more sympathy to the U.S. presence.”

The demise of Zarqawi also throws a lifeline to Iraqi’s new prime minister, Nouri al-Maliki. After weeks of sectarian squabbles, Iraq’s parties finally agreed on a choice for defense minister and interior minister, thus completing the new government.

Maliki remains weak, sectarian tensions remain strong; Iraqis know the death of other terrorists didn’t stop the killing. Indeed, U.S. military officials believe Zarqawi designated a successor to continue his grisly work if he was sidelined.

But the killing of this killer gives Maliki a boost. It provides an opening for the two key ministers to show whether they can improve security in Baghdad. Zebari told me there will soon be a major operation by U.S. and Iraqi forces to clean Baghdad of insurgents.

Baghdadis will be waiting to see whether these forces can capitalize on this moment. And, at least for now, they can dare to hope.