Iraq’s Oil Production Collapses as War Conditions and Hormuz Blockade Force Massive Project Suspensions

Iraq's oil output drops by 70% as war conditions force project suspensions and the Strait of Hormuz remains closed. Read the update from the Iraqi Oil Ministry.

By: AXL Media

Published: Mar 27, 2026, 1:07 PM EDT

Source: Information for this report was sourced from Anadolu Agency and the Iraqi News Agency (INA).

The "Reality Imposed by War": Widespread Project Suspensions

The Iraqi Ministry of Oil confirmed on Friday that the vast majority of the country's petroleum projects have been put on hold due to the escalating conflict between the U.S.-Israeli coalition and Iran. Bassem Mohammed Khudair, Deputy Oil Minister for Extraction Affairs, stated that the "reality of war" has made it impossible to maintain normal operations. While Iraqi personnel continue to manage some fields remotely in coordination with foreign firms, any project requiring imported materials or complex logistics has been frozen. This suspension threatens the long-term infrastructure goals of a nation that relies almost entirely on oil revenue for its national budget.

Basra Production Plummets by Over 70%

The most striking evidence of the sector's decline is the collapse of output at the state-run Basra Oil Company. Deputy Oil Minister Hayan Abdul Ghani revealed that production has been slashed from a pre-war high of 3.3 million barrels per day (bpd) to a mere 900,000 bpd. This drastic reduction follows the total cessation of oil exports from Iraq's southern terminals. Currently, the limited output is being diverted exclusively to domestic refineries to ensure that Iraq can maintain its own internal power supply and fuel needs, effectively removing over 2 million barrels of Iraqi crude from the global market daily.

The "Hormuz Obstacle": A Logistical Stranglehold

Iraq is uniquely vulnerable to the effective closure of the Strait of Hormuz, which began in early March. As a primarily "water-locked" oil exporter via the Persian Gulf, the disruption of this maritime chokepoint has rendered southern export routes useless. Minister Khudair warned that as long as the strait remains disrupted, sustaining vital energy projects is "impossible," as the specialized equipment and chemicals required for advanced extraction and construction cannot reach Iraqi ports. This bottleneck has also sent global shipping costs soaring, making any attempt at alternative land-based exports economically unfeasible.