Iraq

On April 5, the Iraqi-owned vessel Ocean Thunder — loaded with approximately 1 million barrels of Basrah Heavy crude loaded on March 3 — transited the Strait of Hormuz for the first time since the conflict began. The cargo is expected to discharge at Malaysia's Pengerang refinery around April 18. This follows an informal agreement between Iraqi and Iranian officials allowing Iraqi crude to transit the strait, likely contingent on payment of a transit fee.

This is a single tanker carrying 1 million barrels — against a pre-war export rate of 3.3 million barrels per day from Basra. Iraq's SOMO requested lifting schedules from buyers on April 7, signalling loading terminals at Basra were "fully operational." But the recovery path is slow and uncertain.

The obstacles remain substantial. War risk insurance premiums for Persian Gulf transits have increased so dramatically that the route is barely economical even with Iran's de facto exemption for Iraqi vessels. Iraq lacks a national fleet, forcing reliance on third-party shipping companies unwilling to expose their vessels to the risk. The ceasefire has been repeatedly violated and Hormuz transit conditions change daily.

As of April 22, Brent is trading at ~$102/bbl. Iran has seized two container ships in Hormuz today. The situation remains highly unstable — any resumption of hostilities or ceasefire collapse would immediately halt the trickle of Iraqi exports that have just begun.

As of mid-June 2026, the US and Iran have signed an interim deal to reopen the Strait of Hormuz — formally signed June 18, with Iran permitting toll-free transit for 60 days — and the strait is now nominally reopened. For Iraq — 97% Hormuz-dependent with no bypass route — this is the single most important development of the crisis. But analysts caution against expecting a rapid rebound: even with a signed deal, mine-clearing, the return of war-risk insurers, and the restoration of normal tanker traffic could take months. Kpler's base case remains a roughly three-month path back above 4M bbl/d once Hormuz reopens properly, and that clock only starts once transit is demonstrably safe and reliable.

With Hormuz effectively closed and war risk insurance making tanker transit uneconomical, Iraq has opened an emergency overland export route. The Rabia-Yarubiyah border crossing between Iraq and Syria — closed since 2011 due to the Syrian civil war and subsequently seized by ISIS in 2014 before being retaken by Kurdish forces — has been reopened, offering a truck-based export corridor toward the Syrian coast.

The limitations are severe. Overland trucking of crude oil is orders of magnitude less efficient than pipeline or tanker transport. The volumes achievable by lorry are a fraction of what Basra's export terminals can load in a single hour. The route passes through Nineveh province in Iraq and Hasakah in Syria — areas with a history of conflict and drone attacks, currently contested between Iraqi Kurdish forces, Syrian authorities, and remnant militant groups.

The route to Syria's Tartus or Latakia ports on the Mediterranean would also require Syrian government cooperation and functioning port infrastructure — neither of which is guaranteed given the ongoing instability following the fall of the Assad government. Iraq's overland exports are being described by analysts as a "crisis management tool" rather than a strategic solution.

The fundamental reality has not changed: a complete reopening of the Strait of Hormuz is the only viable solution for Iraq. Kuwait, Qatar and Iraq are the three countries most exposed to prolonged Hormuz closure — all lack meaningful alternative export infrastructure.

Iraq declared force majeure on all oilfields operated by foreign companies on March 17 2026 — a legal measure suspending contractual obligations — after military operations disrupted navigation through the Strait of Hormuz and halted most of the country's crude exports. The decision was communicated in a letter from the oil ministry seen by Reuters.

The production collapse was the largest single-country shut-in during the crisis. Kpler estimates production fell from 4.25M bpd pre-war to approximately 875K bpd — a reduction of 3.4M bpd. Basra export terminals, which handled 3.3M bpd in February, went to zero. All remaining production was directed to domestic refineries. Oil revenue — approximately 90% of Iraq's government budget — effectively stopped.

Drone strikes occurred in early March and again on April 4, targeting storage facilities west of Basra and the North Rumaila oilfield. Kpler assesses these hit equipment storage areas rather than critical production infrastructure, meaning the shut-in is driven primarily by export bottlenecks rather than physical damage. This is important: when Hormuz reopens properly, Iraqi production can recover relatively quickly — Kpler's base case is three months to above 4M bpd.

The standard response to Hormuz disruption is to redirect Iraqi crude northward through the Kirkuk-Ceyhan pipeline to the Turkish port of Ceyhan on the Mediterranean. This alternative does not work at scale.

The Kirkuk-Ceyhan pipeline carries approximately 200,000 barrels per day at current capacity — about 6% of the 3.3 million barrels per day exported from Basra pre-crisis. Even at theoretical maximum utilisation, the northern route cannot compensate for the loss of southern exports. The pipeline has been operating well below its 1.6 million barrel per day design capacity since March 2023 due to the unresolved KRG-Baghdad revenue dispute.

A proposal to build a pipeline from southern Iraq to Jordan's Aqaba port — which would have provided genuine Hormuz bypass capability — was abandoned years ago. An Iraqi official told The National: "It would have been very useful to us during this difficult time."

The Kurdistan Regional Government controls approximately 400,000–500,000 barrels per day of production in northern Iraq, exported via the Kirkuk-Ceyhan pipeline through Turkey. In March 2023, an international arbitration tribunal ruled in favour of Iraq against Turkey over KRG crude exports — Turkey halted pipeline flows in compliance. The pipeline has carried only a fraction of its 1.6 million barrel per day capacity since.

The dispute is structural: the KRG wants to sell crude independently and receive direct payment; Baghdad insists on centralising export revenue. In February 2025 Iraq's parliament passed a budget amendment requiring payment of $16/bbl to IOCs operating in the KRG — only partial success in restarting flows.

Iraq entered the Hormuz crisis of March 2026 with its only viable alternative export route already operating at 12% of capacity. The structural failure to resolve the KRG dispute — compounded by the abandoned Aqaba pipeline proposal — left Iraq with no fallback when southern terminals shut.