Iraq declares force majeure on foreign oilfields as Hormuz disruption halts exports

(Reuters) - Iraq has declared force majeure on oilfields operated by foreign companies after disruptions to shipping through the Strait of Hormuz halted most of the country’s crude exports, according to officials familiar with the decision.

Escalating military activity in the region has severely constrained tanker traffic through the waterway, a key route for roughly 20% of global oil and LNG flows. Iraq relies heavily on southern export routes via the Gulf, leaving it particularly exposed to the disruption, Reuters reported.

The oil ministry said export operations effectively stopped as international partners were unable to nominate tankers to lift cargoes, despite the State Organization for Marketing of Oil (SOMO) being ready to load shipments. As storage capacity reached its limits, authorities ordered production cuts across affected concession areas.

Output from the Basra Oil Company has fallen to about 900,000 bpd from roughly 3.3 MMbpd, with remaining volumes redirected to domestic refining, according to the ministry.

According to Reuters, the force majeure declaration suspends contractual obligations for international operators and reflects the severity of the supply disruption. Officials said the situation will be reviewed as regional conditions evolve, with discussions underway to manage essential operations.

The outage is expected to strain Iraq’s finances, which depend on crude exports for the vast majority of government revenue, and adds further pressure to global oil markets already tightening amid escalating conflict in the region.