Many Muslims are celebrating the world cup event with flags of the participating countries.

Answer

Flying the flags and displaying the symbols of kuffaar countries are haraam.

Emulating the kuffaar is haraam. Many of the flags have crosses which are symbols of shirk and kufr. Nabi Isaa's (alayhis salaam) function when he comes to earth will be to eliminate all crosses. Maulana Sulayman Kindi who happens to be a member of the NNB Jamiat has written a good article which explains this prohibition.