Oil Markets Reel as Iraq Halts Exports, WTI Nears Peak

Iraq halts oil exports due to Hormuz blockade, slashing output by 73%. WTI crude surges 65% this year as IEA warns of historic energy security threat and US issues Iran ultimatum.

Global energy markets are on high alert following Iraq's declaration of force majeure across its entire oil sector. This drastic measure, prompted by a sustained military blockade of the Strait of Hormuz, has effectively halted exports and raised the specter of a prolonged supply shock. The immediate fallout is a dramatic contraction in production.

Supply Shock and Strategic Reserves

On the ground, the impact is severe. State-run Basra Oil Company has been forced to slash output from 3.3 million barrels per day to just 900,000. With local storage facilities nearly full, numerous foreign operators have suspended work at affected oil fields. The International Energy Agency (IEA) has labeled the situation the most significant threat to energy security in history. IEA Executive Director Fatih Birol further warned that restoring supply chains from the Gulf region could take six months or longer.

Attention has turned to whether the temporary release of Iranian reserves can offset the physical shortfall caused by Iraq's disruption. Market sentiment remains skeptical, as the critical shipping lanes through the Strait of Hormuz stay blocked. A lasting de-escalation in the Gulf is seen as the only sustainable solution to ease price pressures. In a countermove, U.S. Treasury Secretary Scott Bessent is attempting to mitigate the crisis by temporarily easing sanctions on already-loaded Iranian crude, aiming to make an additional 140 million barrels available by mid-April.

WTI Prices Approach Record High

The tense situation is reflected directly in commodity prices. West Texas Intermediate (WTI) crude closed Friday's trading session at $94.33 per barrel, trading just shy of its 52-week high of $95.46 reached mere days ago. Since the start of the year, the benchmark U.S. oil grade has surged by almost 65 percent. Volatility remains extremely elevated at over 63 percent, with every piece of news regarding military movements being instantly priced in.

Political and Military Tensions Escalate

Alongside the economic reaction, political rhetoric is intensifying. U.S. President Donald Trump has issued a 48-hour ultimatum to Iran to reopen the Strait of Hormuz, threatening attacks on energy infrastructure. To bolster this threat, the United States is deploying additional naval units to the region, including the amphibious assault ship USS Boxer.

Should the ultimatum pass without result on Tuesday, the risk of further military escalation looms, which would likely constrict global oil supply even more severely. In the short term, the IEA's emergency plans are coming into focus; these already propose drastic measures such as promoting remote work and implementing speed limits to curb demand.