By Elsie Kamsiyochi
Iraq’s oil industry has been thrown into crisis after escalating conflict in the Middle East effectively blocked shipping through the , forcing the country to slash production dramatically and threatening the stability of global energy markets.
According to several industry officials, oil production from Iraq’s major southern oilfields has collapsed by roughly 70%, falling from around 4.3 million barrels per day before the conflict to just 1.3 million barrels per day. The sharp drop reflects Iraq’s inability to move crude oil exports through the Strait of Hormuz, one of the world’s most critical maritime oil routes, due to the ongoing war involving .
Storage Capacity Reached as Exports Stall
Officials from the , which oversees operations and exports from the southern oilfields, said the production cuts became unavoidable after storage facilities reached their maximum capacity.
With tankers unable to safely navigate the strait, oil that would normally be exported has been accumulating rapidly in storage tanks. Once those facilities filled up, Iraq was forced to significantly reduce production.
The limited output that continues to be pumped is now being redirected almost entirely to domestic refineries in order to maintain fuel supplies inside the country.
“This is an unprecedented operational challenge,” one official said. “Our storage is full, exports are nearly frozen, and the oil that remains is being used to support local energy needs.”
Exports Fall to a Fraction of Normal Levels
Iraq’s crude exports from its southern terminals—normally the backbone of the country’s oil economy—have also plunged.
Sources said exports dropped to roughly 800,000 barrels per day on Sunday, far below the 3.3 million barrels per day shipped in February, according to oil ministry records.
Only two oil tankers managed to load crude before shipments effectively stopped:
- Cospearl Lake
- Yuan Hua Hu
Each vessel loaded approximately two million barrels of crude oil before departing around 8 p.m. local time. After those departures, officials reported no additional tankers arriving, forcing operations at southern export terminals to halt entirely.
Shipping agents say many international tanker operators are refusing to enter the region due to the security risks created by the conflict and the uncertainty surrounding passage through the strait.
Global Energy Route Under Threat
The Strait of Hormuz is widely considered one of the most important energy chokepoints in the world. Roughly one-fifth of global oil and liquefied natural gas shipments pass through the narrow waterway that connects the Persian Gulf to the Gulf of Oman and the wider international market.
Any disruption in this corridor has immediate consequences for global oil supply, prices, and energy security.
Energy analysts warn that if the blockade continues, the effects could ripple through international markets, forcing major oil-importing nations to tap strategic reserves and seek alternative supply routes.
Economic Shock for Iraq
For Iraq, the disruption could prove especially damaging. The country depends heavily on oil exports to finance its government operations, public services, and economic programs.
Crude sales account for more than 90% of Iraq’s national income, making the collapse in exports a severe threat to the country’s financial stability.
“This is the most serious operational threat Iraq has faced in more than two decades,” a senior official from the Iraqi oil ministry said.
If exports remain blocked for an extended period, Baghdad could face mounting budget deficits, pressure on public salaries, and economic instability.
Wider Regional Impact
The situation also highlights the broader risks posed by the ongoing conflict involving Iran and other regional actors. Several energy-producing nations across the Middle East have already begun taking precautionary measures, including cutting production or preparing emergency oil reserve releases.
Industry experts say prolonged disruption in the Strait of Hormuz could reshape global oil flows and push energy markets into one of their most volatile periods in recent years.
For now, Iraq’s oil sector remains largely stalled, waiting for the reopening of one of the world’s most vital energy lifelines.
Source Reuters
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