Guwahati, May 25, 2026 – Iraq’s oil output has plummeted dramatically in recent months following the effective closure of the Strait of Hormuz, a critical chokepoint for global energy shipments, as the ongoing US-Iran conflict continues to disrupt the region.
Iraq’s southern oilfields, which normally account for the bulk of the country’s production, have seen output fall by approximately 70% to around 1.3 million barrels per day (bpd) as of early March 2026. This marks a sharp decline from pre-conflict levels of roughly 4.3 million bpd. With export terminals in Basra unable to load tankers due to the disrupted shipping routes, much of the remaining production has been redirected to domestic refineries, while storage tanks have filled rapidly.
The Strait of Hormuz, through which roughly 20% of the world’s oil and liquefied natural gas typically passes, has been severely restricted since late February 2026. Iranian actions and threats in response to US and Israeli strikes, combined with a US naval blockade of Iranian ports and heightened security risks, have led major shipping companies to suspend operations. Naval incidents, skyrocketing insurance premiums, and fear of attacks have reduced tanker traffic to a fraction of normal volumes, with only sporadic high-risk transits occurring.
The impact extends beyond Iraq. Other Gulf producers, including Saudi Arabia and the UAE, have also curtailed output as storage capacities were reached. This has triggered a significant global oil price shock, affecting energy markets worldwide.
For Iraq, the crisis is particularly severe. Oil revenues constitute approximately 90% of the national budget. Reports indicate that April 2026 exports through the Hormuz route dropped by nearly 89%, totaling just around 10 million barrels for the entire month. The economic fallout threatens government finances, public services, and broader stability in the country.
As of late May 2026, the situation in the Strait of Hormuz shows limited signs of improvement. While occasional tankers continue to navigate the route under heightened risk, the chokepoint remains a major bottleneck, keeping regional oil flows well below pre-conflict levels.
This collapse in Iraqi production is a direct consequence of the escalation that began in late February 2026 between the United States, Iran, and Israel. Industry analysts warn that prolonged disruption could have lasting effects on global energy security unless a diplomatic resolution is reached.
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