Iraq Oil Sector On The Brink

6 Mar 2026 Issue: 69 / 10 By: Yesar Al-Maleki

Iraq is in the grips of an unprecedented crisis. It has started to shut down oil fields as the fallout from the US-Iran war has disrupted exports. With its primary export route effectively closed and storage capacity limited, crude has been backing up at fields and terminals, leaving operators little choice but to curtail production. Baghdad is keeping some production of crude and associated gas going to meet domestic demand.

Iraq’s oil sector is the first domino to fall in the Middle East amid the escalating regional conflict sparked by US-Israeli military strikes against Iran on 28 February. The country’s oil sector is the most vulnerable to disruption as successive governments have failed to invest in resilience and flexibility. Faced with the effective closure of its primary oil export route via the Strait of Hormuz (MEES, 6 March), Iraq has become the first state in the region to begin large scale production shut-ins. It probably won’t be the last.

The closure of Hormuz leaves Baghdad facing a multi-layered crisis that it is ill prepared to manage. It is already reducing production from giant oil fields in the south and in some cases shutting production entirely. The cascading impact will have profound implications for gas production, power generation and industry. (CONTINUED - 1517 WORDS)