If the US only stepped in when Iran entered Iraqi territory, it really can't be said that the US was maintaining strict neutrality, since Iraq invaded Iran in the first place. Clearly, the US wanted Iraq to invade Iran, and it did not want Iran to enter Iraqi territory. Had the US maintained neutrality, it would not have interfered in any way at any time, and certainly not after it had already allowed Iraq to invade Iran.

Iraq was our proxy against the Iranian revolutionaries in the Iran Iraq war.