Loss of drilling fluid commonly known as mud loss is considered as one of the critical issues during the drilling operation as it can cause severe formation damage. To minimize fluid loss, researchers introduced numerous additives but did not get the expected result. Recently, the use of nanoparticles (NPs) in drilling fluid gives a new hope to control the fluid loss. A basic KCl–Glycol–PHPA polymer-based mud is made, and six different concentrations of 0.1, 0.5, 1.0, 1.5, 2.0, 3.0 wt% iron (III) oxide or Hematite (Fe₂O₃) NPs are mixed with the basic mud. The experimental observations reveal that fluid loss of basic mud is 5.9 ml after 30 min and prepared nano-based drilling mud results in a less fluid loss at all concentrations. Nanoparticles with a concentration of 0.5 wt% result in a 5.1 ml fluid loss at the API LTLP filter press test. On the other hand, nanoparticles with a concentration of 3.0 wt% enhance the plastic viscosity, yield point, and 10 s gel strength by 15.0, 3.0, and 12.5%, respectively. The optimum concentration of hematite NPs is found to be 0.5 wt% which reduces the API LPLT filtrate volume and filter cake thickness by 13.6 and 40%, respectively, as well as an improvement of plastic viscosity by 10%.