Shale problems are the most common problems during the drilling process including sloughing shales and swelling clays. To minimize these problems, drilling fluid can be used to solve it. Wellbore stability analysis is critical to minimizing Non Productive Time and drilling costs in the East Baghdad Oilfield. Tanuma and Zubair formations are challenging formations due to shale-fluid chemical interaction. The present study aims to investigate the properties of shale samples and develop drilling muds through laboratory tests. The shale's physical attributes were analyzed using a stereomicroscope and scanning electron microscope to figure out its structures. Cation exchange capacity and capillary suction timer were also conducted to analyze the shale reactivity and select the shale inhibitors. Based on these tests, four drilling muds with unique additives were formulated, and their efficacy was verified using the linear swelling meter and the hot rolling experiments. The results showed a consistent and immediate interaction between the shale and various drilling fluids. A comparison was made between the first and second muds for Tanumah and Zubair formations, it was discovered that water-based muds1 exhibited greater swelling than water-based muds2, where swelling ratios for Tanuma shale units were 6.1% for water-based muds1 and 3% for water-based muds2. In comparison, for Zubair shale units, they were 3.01% and 1.53%, respectively. It is recommended to add 7% KCl to Tanuma mud and 3% KCl to Zubair mud as optimum additives with polypeptide hydration suppressants for inhibiting shale swelling and reducing its risk. This study's findings can contribute to the development of drilling muds that address shale instability concerns and thus minimize drilling expenditures.