Iraq Oil Output Rebounds to Pre-Hormuz Levels, Recovery Fragile

According to TradePulse, Iraq's oil sector has clawed its way back to pre-closure output levels — but the rebound is far more fragile than the headline numbers suggest. Nationwide crude production hit 4.22 million bpd in October, with exports averaging 3.35 million to 3.5 million bpd after a 9.5% month-on-month jump. Yet the wells behind those figures were shut in for months, exports still depend on costly workarounds, and Baghdad is courting two major pipeline fixes: a 350,000-bpd federal line to Turkey and a potential 1.65-million-bpd route through Saudi Arabia to the Red Sea.

• Iraq produced 4.22 million bpd in October — 3.95 million bpd from southern fields under Baghdad and 265,000 bpd from Kurdistan Regional Government (KRG) fields — roughly matching levels seen before the Strait of Hormuz was closed.
• Wells shut in after Iran closed the strait face short-term capacity losses and potentially permanent damage from reservoir pressure loss, water infiltration and corrosion.
• Exports now rely on more than 500 truck trips a day, ship-to-ship transfers in the Gulf of Oman and a battered northern pipeline patched together with trucked crude.
• Saudi Arabia has given preliminary approval to revive the long-idle IPSA pipeline to the Red Sea, while Baghdad pushes an independent federal line toward Turkey's Ceyhan port.

Why the Hormuz Closure Hit Iraq Harder Than Any Other Country

No country aside from Iran itself has felt the economic consequences of the U.S.-Israel-Iran war more than Iraq. More than 90% of the state budget historically comes from oil, and around 95% of that oil historically had to transit the Strait of Hormuz before it could be monetized. When Iran shut the waterway on the first day of "Operation Epic Fury" on February 28, Iraq's financial lifeline closed with it.

A temporary agreement reached on March 17 between Tehran and Baghdad was supposed to secure safe passage for Iraqi ships. It delivered no quick fix. Most global shipping firms still refused to send vessels into the Gulf because of sky-high insurance premiums and the threat of sea mines, and Iraq — lacking a large national fleet — remained reliant on third-party owners.

The result was brutal. With storage facilities for drilled crude full, Iraqi oil production fell by 80%, forcing the complete shutdown of many production wells. Prolonged shut-ins threaten permanent damage through loss of reservoir pressure, water infiltration and corrosion, among other factors.

The October Rebound Looks Strong — but Rests on Shaky Ground

October brought a nationwide recovery: 4.22 million bpd of crude, of which 3.95 million bpd came from the Federal Government of Iraq region in the south under Baghdad's direct jurisdiction and 265,000 bpd from fields administered by the KRG out of Erbil. Exports surged 9.5% month-on-month to between 3.35 million and 3.5 million bpd — around where both flows stood before the strait closed.

A senior source who works very closely with Iraq's Oil Ministry said the recovery is weaker than it appears. "Because the government's pushing production everywhere to make up for the [country's] financial losses, the output drops in key fields are less obvious, but they're there and they'll show up increasingly as time goes on," he said.

The impetus to run output at its limits will not fade soon. Iraq's budget deficit soared 346% in the first nine months of the year, driven by a 50.8% year-on-year drop in oil revenues.

Trucks, Ship Transfers and a 500,000-bpd Northern Workaround

Before the war, Iraq's export machine ran relatively smoothly. About 400,000-450,000 bpd flowed through the KRG pipeline to Turkey's Mediterranean port of Ceyhan until legal action closed that route on March 25, 2023; it reopened on September 27, 2025 with structural damage. The southern route carried roughly 3.3 million to 3.4 million bpd down to the main export hub of Basra and out through the Persian Gulf–Hormuz–Gulf of Oman corridor.

Neither route works normally today. The northern line has been hit by repeated drone and missile attacks since the war began, leaving it with severely limited capabilities. Shortly after the strait closed, Iraq turned to trucking, gradually scaling up to more than 500 vehicles a day — each lorry tanker carrying 200 to 250 barrels — across the Al-Waleed border crossing, reopened on a trial basis, and through Syria to the Baniyas refinery and oil terminal on the Mediterranean coast for export, especially to Europe.

A similar method now moves a collective 200,000 bpd of southern crude to collecting stations at Sarallu, in the wider Kirkuk energy corridor, and Kurdistan's Khurmala junction, where an additional 175,000 bpd of Kurdish crude and 125,000 bpd of Kirkuk crude are blended in. That 500,000 bpd then moves north through Turkish territory via the Kurdistan pipeline network to Ceyhan.

On the southern route, the State Oil Marketing Organization (SOMO) and international buyers lean heavily on shuttle-shipping, ship-to-ship transfers in the Gulf of Oman and smaller vessels operating under heavy military protection to squeeze through the Hormuz chokepoint. The patchwork is extremely expensive, structurally fragile and geopolitically exposed to the whims of Turkey, the KRG and Iran.

Kirkuk-Nineveh Pipeline Nears Start-Up, Independent of the KRG

Baghdad's first remedy is the Kirkuk-Nineveh pipeline, the vital northern leg of a rehabilitated federal Iraq-Turkey network built to carry crude around KRG territory directly to the Fishkhabur border terminal. The line is structurally complete and undergoing initial system testing. Its 350,000-bpd design capacity reflects the Oil Ministry's cautious, phased approach: final pressure tests on the connecting Baiji loops will take a few more months, and full utilization remains constrained by the limited capacity of the existing Basra-to-Kirkuk segment.

Once the planned southern Basra-to-Haditha corridor is built and plugged into the new line, Baghdad's blueprint would create a seamless, high-volume flow from the Persian Gulf to Turkey — at least in theory.

The Red Sea Option: Saudi Preliminary Approval for IPSA

The longer-term option is even more consequential. Saudi Arabia last week gave preliminary approval to revive the long-idle 'Iraqi Pipeline in Saudi Arabia' (IPSA), the Iraqi Pipeline in Saudi Arabia. The line spans 1,568 kilometres from Iraq's Zubair oilfield in Basra to the Al-Mu'ajjiz terminal near Yanbu on Saudi Arabia's Red Sea coast. Built in the 1980s to bypass the Persian Gulf during the Iran-Iraq War, it became operational in 1987 with a design capacity of 1.65 million bpd and was permanently shut down in August 1990 following Iraq's invasion of Kuwait. Saudi Arabia officially confiscated the pipeline assets within its borders in 2001, later repurposing part of the infrastructure for its own domestic natural gas and East-West oil transit.

Riyadh's conditions are steep. It favors building a replacement line — rehabilitating the existing one would cost nearly as much — and says Baghdad should cover part of the cost. Because the Saudi section already transports the kingdom's own crude from its east coast to the Red Sea, any revival agreement would require Iraq to rebuild its own segment and both countries to reach a political understanding.

Why It Matters

With oil funding more than 90% of the state budget and revenues down 50.8% this year, Iraq cannot absorb another export shock — and neither, arguably, can the market: sustained well damage would quietly erode OPEC's spare capacity long after the fighting stops. The pipeline diplomacy also carries a strategic edge. Redirecting Iraqi barrels away from the Persian Gulf fits Washington's long-term aim of cutting Iran's leverage over Gulf oil flows and shifting Baghdad out of Tehran's sphere of influence — and, by extension, out of the orbit of China and Russia. For U.S. President Donald Trump, whose domestic options narrowed after the November 3 midterm elections, tying Iraq's export revival to the Abraham Accords framework could signal a rare foreign-policy win.

FAQ

How much oil is Iraq producing now? October output rebounded to 4.22 million bpd — 3.95 million bpd from southern fields under Baghdad and 265,000 bpd from KRG-run fields — with exports averaging 3.35 million to 3.5 million bpd.

What is the IPSA pipeline? A 1,568-kilometre line running from Iraq's Zubair field in Basra to Saudi Arabia's Al-Mu'ajjiz terminal near Yanbu on the Red Sea, designed for 1.65 million bpd. It operated from 1987 until its 1990 shutdown and has been idle since; Riyadh has now given preliminary approval to revive it, subject to strict conditions.

How is Iraq exporting oil while the Strait of Hormuz remains disrupted? Through truck convoys feeding 500,000 bpd into the northern pipeline network to Turkey's Ceyhan port, and through shuttle-shipping and ship-to-ship transfers in the Gulf of Oman for southern Basra barrels.