Iraqi Oil Production Plunges 60%
Iraqi oil production has collapsed by 60% and faces an imminent total shutdown as storage facilities are full. The crisis stems from the ongoing blockade of the Strait of Hormuz, with Iran threatening to "set ablaze" any ships in the critical passage, effectively choking off a major source of global supply.
Iraq's oil output has plummeted from approximately 4.3 million barrels per day to between 1.7 and 1.8 million. This steep decline is a direct result of the logistical chaos in the Persian Gulf, where a scarcity of available tankers has forced production cuts as storage facilities reach their limits. Iraq was the first major Gulf producer to slash production, with Kuwait and the United Arab Emirates following suit. The Strait of Hormuz is a critical chokepoint for global energy supplies, with about 20% of the world's total oil consumption passing through it. In early 2025, oil flows through the strait averaged 20.1 million barrels per day. Any prolonged disruption to this artery of the global energy market poses a significant threat to worldwide energy security. The blockade's impact on global oil prices has been immediate, with Brent crude, a key international benchmark, surging past $80 a barrel. Some analysts predict a prolonged closure could drive prices to $150 a barrel or higher. This price shock is significantly larger than the market disruption seen after Russia's 2022 invasion of Ukraine. For Iraq, the consequences are dire. Crude oil export revenues have historically accounted for over two-thirds of its GDP. The nation holds the world's fifth-largest proven petroleum reserves, but its energy sector has been plagued by decades of sanctions and war, leaving its infrastructure in a vulnerable state. The current crisis is not just a price shock but a quantity shock, as a significant portion of the global oil supply is suddenly at risk. This affects not only crude oil but also natural gas, with nearly 20% of global liquefied natural gas (LNG) exports from Qatar and the UAE also transiting the strait. This creates a ripple effect across the entire commodities supply chain. Major Asian economies are particularly vulnerable to the disruption in the Strait of Hormuz. In early 2025, China was the destination for over a third of the crude oil passing through the strait, with India, Japan, and South Korea also being major importers. The United States' direct reliance is comparatively smaller, with about 7% of its crude oil imports transiting the strait in early 2025.
