Iraq’s Exposure and the Threat of Force Majeure
Monday, 20 July 2026
By Atlantic Digest Oil & Gas Desk
Renewed tensions in the Middle East have once again placed Iraq at the centre of concerns over global energy security, with analysts warning that any prolonged disruption to the Strait of Hormuz could severely affect the country’s oil exports and trigger fresh instability in international energy markets.
As the second-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), Iraq remains heavily dependent on Gulf export routes. During the earlier phase of the U.S.-Iran conflict, the country was forced to cut crude oil production by approximately 1.5 million barrels per day—nearly half of its total output—after export routes were disrupted and storage facilities reached capacity.
The disruption compelled Iraqi authorities to declare force majeure, a legal provision that allows contractual obligations to be suspended due to extraordinary events beyond a party’s control. The declaration affected several crude export contracts and highlighted the vulnerability of Iraq’s energy sector to regional conflict.
With hostilities between the United States and Iran escalating once again, energy experts warn that another sustained closure of the Strait of Hormuz could produce similar consequences. The strategic waterway serves as one of the world’s busiest oil transit routes, carrying a significant share of global crude exports from Iraq and other Gulf producers.
A prolonged disruption would not only reduce Iraqi export revenues but could also affect neighbouring Gulf states, tightening global oil supplies and placing additional pressure on international fuel prices.
The effects would likely be felt most strongly across Asia, where major economies rely heavily on crude shipments from the Gulf. During the previous crisis, China instructed several state-owned refineries to suspend fuel exports in order to safeguard domestic supplies, while Japan drew from its strategic petroleum reserves to cushion the impact of supply disruptions.
Analysts say similar emergency measures could be required again if shipping through the Strait of Hormuz remains restricted for an extended period.
Despite ongoing efforts by oil-producing countries to diversify export routes, Iraq continues to depend largely on Gulf maritime corridors for access to international markets, leaving its economy particularly vulnerable to geopolitical instability.
Energy market observers believe that sustained military confrontation in the region could prolong uncertainty, increase insurance costs for commercial shipping and disrupt supply chains far beyond the Middle East.
As diplomatic efforts to ease tensions remain uncertain, Iraq’s position underscores the broader risks facing global energy markets, where conflict in a single strategic corridor can quickly translate into higher oil prices, inflationary pressures and economic uncertainty across the world.
