Type narrowing fails for union of iterable and dictionary when using `isinstance(x, Iterable)` in a conditional

Bug Report

When using Union[Iterable[int], Dict[str, int]] together with isinstance(x, Iterable) in a conditional, the narrowing of the type does not work as expected. The previously correctly narrowed type is reverted to the un-narrowed type inside the branch.

To Reproduce

from typing import Dict, Iterable, Union


def test_iterable(x: Union[Iterable[int], Dict[str, int]]) -> Iterable[int]:
    if isinstance(x, dict):
        return [1, 2, 3]
    reveal_type(x)  # typing.Iterable[builtins.int]
    if isinstance(x, Iterable):
        reveal_type(x)  # Union[typing.Iterable[builtins.int], builtins.dict[builtins.str, builtins.int]]
        return x  # mypy falsely returns an error here

Expected Behavior

The type of x should be correctly narrowed down to Iterable[int].

Actual Behavior

Running mypy returns:

example.py:10: error: Incompatible return value type (got "Union[Iterable[int], Dict[str, int]]", expected "Iterable[int]")
Found 1 error in 1 file (checked 1 source file)

The problem persists even if the second if is changed to elif.

Your Environment

I used a clean virtual environment to test, only mypy was installed.

• Mypy version used: 0.971
• Python version used: 3.9.5

Start with the reproducer in example.py and run mypy against it to confirm the reported error with the union and isinstance checks. Trace the type narrowing behavior until the branch reports Iterable[int] as expected, then verify that the example completes without the incompatible return error.