Iraq faces a severe fiscal crisis following the escalation of the US-Iran conflict on February 28, 2026. The disruption of the Strait of Hormuz, which handles roughly 20% of global oil supply, severely restricted Iraq's primary export route. Consequently, the nation's oil production dropped from an average of 4.3 million barrels per day to approximately 1.4 million barrels per day.
Monthly oil revenues plummeted by 84%, falling from $6.8 billion in February 2026 to $1.1 billion by April. At the lowest point of the crisis, exports reached only 200 000 barrels per day. To maintain public spending and salaries, the government utilized central bank reserves, which decreased from $102 billion to $86 billion by late June 2026.
The $16 billion reduction in reserves was partly driven by transit fees paid to Iran to restore export volumes. By September 2026, Iraq managed to increase exports to over 3 million barrels per day by utilizing alternative logistics, including the Iraq-Turkey pipeline. Despite this recovery, production remains below the pre-crisis level of 4.3 million barrels per day.
