The Dragon-Jhereg War was a nasty interplay between the two Houses approximately ten thousand years prior to current events during an Athyra Reign. It was caused when, for unknown reasons, a Jhereg wished to have another Jhereg disposed of. The assassin located him in the sanctuary of a Dragonlord then proceeded to assassinate him.
The House of the Dragon demanded that House Jhereg apologize for this, which it did. Then it demanded that the assassin's head be handed to them and received the head of their messenger inside a basket. The location of the person who ordered the assassination contract was somehow discovered and his house was raided and burned, and him and his family killed. The Dragon Heir was discovered with a six inch pike through his head some place outside the Imperial Palace in Dragaera City. Four bars at Lower Kieron Road, all of which housed some variety of Jhereg business activity were assaulted, burned, and several patrons and all Jhereg killed, some with Morganti weapons. The Warlord of the Empire was distributed around different homes of various high ranking Dragonlords. House Dragon declared it wanted to wipe the House of the Jhereg entirely out of the Cycle and drive the Jhereg into extinction. The House of the Jhereg began working on eliminating each Dragon who had over one thousand troops and going down from there. At some point within these exchanges, the Athyra Emperor finally managed to forcibly conclude a peace treaty between the remaining Dragon leaders and the Jhereg Council.
The aftermath was the most highly skilled generals, warriors and thinkers in the House of the Dragon dead and Organization businesses suffering long-lasting damage which took millenia to be stitched up. It appears to be admitted by the House of the Jhereg that their side was worse off, but it is not boasted of by the Dragons. It is also to be expected as the House of the Dragon was way up in the Cycle while House Jhereg at the time was, naturally, quite low. Ever since, a Dragon has never extended formal hospitality to a Jhereg, and the Jhereg never assassinated each other in the home of a Dragonlord. Except, of course, for the times they did:
Warning: high concentration of spoilers ahead
It happened again. A Jhereg friend of a Dragonlord was a guest in his keep when assassinated by another member of his House for personal reasons. This time, the assassin was not under the protection of his House because he was not working for business. In his escape, however, he met some Dragonlords on the way and killed them, and met some of his former Jhereg boss's and killed them also. The assassin himself was killed later, but at the time it was too late to stop anything. The event occurred in the reign of a decadent Phoenix, so neither side trusted the other. Right then, Adron's Disaster occurred which either killed off everyone involved or made them forget about it. Not much people in the Jhereg know of it, either because they haven't been reading the right history books or other reasons.
On another occasion, a particularly devious Jhereg who was on the run from his House after stealing a substantial amount from the Jhereg Treasury had manipulated Morrolan e'Drien into offering him an invitation as a guest within his flying Castle, which he accepted. Morrolan later found out about his intentions (using him against the Jhereg) but, of course, held to his oath to protect all guests up to the duration of their invitation. There were two parties involved in trying to eliminate the Jhereg; People in the Jhereg Council were in favour of being rid of him and plodding through the consequences of another Dragon-Jhereg War, but his designated assassin actually counteracted them by delaying an assassination on their part within Morrolan's home (they had extras working on killing him) until he managed to kill him without violating the guest laws. The target ended up in a jungle with a Morganti dagger jutting out of him, his bodyguards dead, shortly after killing another guest with a Morganti weapon without intending, and his soul was destroyed, so everything ended up peacefully.