The Strait of Hormuz has been largely blocked by Iran since February 28, 2026 , when U.S. and Israeli forces struck Tehran. Only seven ships transited the strait on a recent Friday, followed by four more over the weekend—a fraction of the roughly 100 cargo vessels that normally pass through daily , according to CNN. Three months in, the world's most important energy chokepoint remains a shadow of its former self .
For Iraq, the crisis is existential. More than 94 percent of Iraq's oil exports typically pass through the strait, and oil revenues account for roughly 90 percent of the country's federal budget . With southern exports strangled, Baghdad has turned to a pipeline it once fought to control: the Kirkuk-Ceyhan route through Kurdistan to Turkey's Mediterranean coast. The plan, according to OilPrice.com, is to boost flows to 340,000 barrels per day by combining crude from Kirkuk fields with oil trucked in from central and southern Iraq —triple the volume flowing just weeks ago. It's a workaround born of desperation, and it won't come close to replacing the 3.4 million barrels per day Iraq exported before the war.
Can a Decades-Old Pipeline Save Iraq's Budget?
On March 17, Iraq's federal government and the Kurdistan Regional Government agreed to resume crude exports through the northern segment of the Iraq-Turkey Pipeline, with shipments commencing by March 18 at initial flows of 150,000–250,000 barrels per day , the Middle East Forum reported. The increase follows upgrades at the K1 storage facility in Kirkuk, where the state-run North Oil Company completed the installation and testing of new booster pumps to address previous capacity limitations , according to Rudaw.
The pipeline itself is a relic. Built in the 1970s, the Kirkuk-Ceyhan system enabled Iraq to diversify exports beyond the Persian Gulf . But it's been a political football for years. In March 2023, an international tribunal ruled in Baghdad's favor, ordering Turkey to pay approximately $1.5 billion in damages and confirming the State Oil Marketing Organization's exclusive authority over exports through Ceyhan. Turkey halted flows following the ruling, shutting northern exports for more than two years .
Now, with Hormuz closed, old grievances have been shelved. Kurdistan's Prime Minister Masrour Barzani said his government decided to allow oil to flow "as soon as possible" given the extraordinary circumstances facing the country , The National reported. But the truce is fragile. The KRG said "outlawed militias" made energy fields "targets of their attacks," taking production offline, and claimed Baghdad has taken "no effective measures" to stop the assaults .
Even if the pipeline runs smoothly, the math is grim. The resumption of exports through the Kurdistan pipeline accounts for only about 6% of Iraq's total oil exports , Eco Iraq noted. Iraqi Prime Minister Mohammad Shia al-Sudani approved the allocation of $1.5 billion to develop infrastructure connecting southern fields to the northern route , but that project will take years. And there's a deadline: Turkey will exit the existing treaty with Baghdad that governs the pipeline in July 2026 upon the expiration of the Crude Oil Pipeline Agreement , according to the Foundation for Defense of Democracies.
What's Driving Oil's Three-Day Rally?
Oil prices climbed for a third straight day Wednesday, with $71.50/bbl and $75.20/bbl, according to market data. Iran's state-affiliated news outlet Tasnim said Monday that Iranian negotiators will stop exchanging messages with the U.S. through intermediaries and Tehran will move to fully close the Strait of Hormuz, with "no dialogue" taking place until Israel fully withdraws from occupied areas in Lebanon , CNBC reported. That vow to escalate sent prices surging.
President Donald Trump said a memorandum of understanding with Iran to reopen the Strait of Hormuz could happen over the next week , according to ABC News. But Iranian media reported Tuesday that Iran is reviewing a proposed agreement with the United States to halt the war but has not communicated with Washington for a few days . The whiplash is exhausting traders. Price volatility has forced dealers to scale back their risk exposure, pushing open interest in global benchmark Brent to the lowest since August , Bloomberg reported.
"If the US or Iran's stance leads to a more prolonged closure of the Strait, OECD stocks could reach a critical threshold by mid-September, triggering a price spike towards $150 per barrel," Bridget Payne, head of energy forecasting at Oxford Economics, told Rigzone.
