Iraq’s oil hub slows to a crawl as Strait of Hormuz shutdown strangles
exports
[April 02, 2026] By
SAMYA KULLAB and QASSIM ABDUL-ZAHRA
BASRA, Iraq (AP) — Iraqi oil fields once alive with the buzz of workers
are nearly deserted. Ports that pulsed with the churn of cargo have
fallen still, the din of commerce replaced by the soft rhythm of waves.
A month after the war in Iran started, workers at ports and oil fields
in the province of Basra, where almost all of Iraq's crude is produced
and exported, have grown accustomed to rockets streaking across the sky,
aimed at U.S. air bases and other strategic facilities.
The war, which began with U.S.-Israeli strikes, is dealing a heavy blow
to Iraq's economy. Iraq relies on oil revenues for roughly 90% of its
budget, and most of its oil is exported through the Strait of Hormuz,
the narrow mouth of the Persian Gulf where Iran has effectively stopped
cargo traffic during the conflict. The war also has led to a sharp
reduction in the volume of imported goods reaching southern Iraq's
ports, while attacks have halted traffic at the border it shares with
Iran.
Unlike other countries in the Middle East touched by the war, Iraq hosts
both entrenched Iran-aligned forces and significant U.S. interests,
leaving it exposed to attacks from both sides. Since the war started,
oil production in southern Iraq, where Basra is located, has fallen by
more than 70% and the volume of imported goods reaching the country's
ports has been cut in half. Drone and missile attacks have targeted
American companies and military bases. Iran's allied Iraqi militias also
have struck oil fields and energy infrastructure. Many foreign workers
have left.
The Iraqi government should have enough funds to get through mid-May
without new oil sales, according to experts, but then it will have to
borrow money.
“After that, the government would resort to issuing bonds,” said Ahmed
Tabaqchali, an expert in Iraq’s economy. “But not without consequences.”
Oil production suspended
Across southern Iraq, the closure of the Strait of Hormuz has prompted
oil fields to scale back production and focus on domestic needs, while
oil prices around the globe have risen. Basra’s Zubair oil field, once
producing around 400,000 barrels per day, has seen output drop to
roughly 250,000, officials said.
Iran has offered assurances that Iraqi crude can safely transit the
strait, said Bassem Abdul Karim, the head of the state-run Basra Oil
Company, which oversees production in the province. However, because
Iraq lacks its own tanker fleet and depends on chartered vessels,
shipments ultimately hinge on whether tanker owners are willing to
accept the heightened risks of making the journey. Most are not.
At a degassing station in Zubair, where crude is processed, production
has also slowed dramatically. “It’s quiet now because of the
reductions,” said chief engineer Ammar Hashim. “Of course we are
worried.”
The downturn in Zubair reflects a broader decline in Basra. Output has
dropped from 3.1 million barrels per day to roughly 900,000 across the
province, according to Abdul Karim.
“Exports are currently completely halted. At the moment, we are
considering alternative loading areas, but none are fully operational,”
he told The Associated Press.
That morning, a drone crashed in the Majnoon oil field north of Basra
without detonating. A security official said it's an increasingly common
occurrence, adding that the drone was likely headed toward U.S. bases in
Kuwait. Production at the field has been suspended due to the frequency
of these events. The official spoke on condition of anonymity because he
was not permitted to speak to news media.
Hundreds of employees from American, British, Italian, French and other
international oil companies have left Iraq due to the war. The
departures accelerated after a March 6 drone strike hit the Burjisiya
complex in Basra, a key logistics hub for Iraq’s oil industry used by
numerous companies. The attack targeted U.S. oil services company KBR,
striking its chemical storage facility.
[to top of second column] |
Workers offload cargo of rice from a feeder vessel into tructhe ks
at Umm Qasr Port, a deep-water port, in city of Umm Qasr, Iraq,
Friday, March 27, 2026. (AP Photo/Leo Correa)
 Another drone struck the
British-Petroleum operated Rumaila oil field, prompting some foreign
workers there to leave, said Abdul Karim. The field is still
operating, he said. On Wednesday, multiple drones attacked a fuel
warehouse linked to BP in northern Iraq.
Efforts to reroute Iraq's oil face major constraints: The country
doesn't have the capacity to boost exports via its northern
pipeline, and trucking through Jordan and Syria is costly and
inefficient, said Abdul Karim.
Shipping lanes closed
Umm Qasr, Iraq’s primary deep-water port, was once so noisy with
imported cargo that it could give you a headache, workers there
said.
Now, with the Strait of Hormuz closed, large mother ships bringing
shipments to Iraq can no longer get to the port. Instead, they dock
in the United Arab Emirates, where the cargo is carried by trucks
and then smaller ships to get to Umm Qasr, a costly workaround.
The port’s jetties are running well below their former capacity,
with volumes halved by the war, according to port director Mohammed
Tahir Fadhil.
When the AP visited, just one cargo ship from the U.A.E. had docked.
The threat to shipping lanes escalated after Iran destroyed two
tankers on March 11 in Iraqi waters, the Marshall Islands-flagged
Safesea Vishnu and the Malta-flagged Zefyros.
“Today, our only gateway for goods is the United Arab Emirates,”
said Farhan Fartousi, director of the Iraqi Ports Company.
Trade disrupted
On Sunday morning, Haidar Abdul-Samad, deputy director of Basra’s
Shalamcha border crossing with Iran, was on the phone with an
Iranian official, complaining about electricity cuts that had halted
trade, urging a quick resolution. The power cuts followed an
airstrike that hit the Iranian side of the crossing.
Such disruptions, local officials say, have become routine.
Before the war, the crossing saw constant movement, reflecting
strong familial and commercial ties between Iranians and Iraqis in
the area. It is also a key transit point for traders and pilgrims
heading to Shiite holy sites in central Iraq.
That morning, trucks were backed up for miles.
“Priority is given to food supplies to prevent price increases,”
Abdul-Samad said. “Passenger movement is not at the same level as
before; activity has declined due to the war in Iran.”
Once electricity was restored, 30-year-old Iranian trader Atefa Al-Fatlawi
arrived with her husband and young son. She buys goods at lower
prices in Basra to sell back home.
“We are scared because of the bombings,” she said. “Shalamcha was
targeted. Today, there were no transport vehicles at the garage
because of the attack.”
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