Oil production in southern Iraq has fallen by more than 70% following the closure of the Strait of Hormuz during the current conflict in Iran, according to Iraqi officials. The strait's shutdown has effectively halted Iraq's crude exports, which typically account for roughly 90% of the country's budget revenue.

In Basra province, where almost all of Iraq's crude is produced and exported, output has dropped from 3.1 million barrels per day to approximately 900,000 barrels. The Zubair oil field, previously producing around 400,000 barrels daily, has reduced output to roughly 250,000 barrels as operations focus on domestic needs rather than export.

Bassem Abdul Karim, head of the state-run Basra Oil Company, said exports are currently completely halted. While Iran has offered assurances that Iraqi crude can safely transit the strait, Iraq's dependence on chartered vessels means shipments rely on tanker owners' willingness to accept heightened risks. Most shipping companies are declining to make the journey.

The conflict has also disrupted trade through other channels. Umm Qasr, Iraq's primary deep-water port, is operating at half capacity as cargo ships can no longer reach the facility directly. Instead, goods must be transported through the United Arab Emirates via trucks and smaller vessels, significantly increasing costs.

Hundreds of employees from American, British, Italian, French and other international oil companies have departed Iraq due to security concerns. The exodus accelerated after drone strikes hit oil facilities, including attacks on the Burjisiya complex in Basra and the British Petroleum-operated Rumaila oil field.

Economic experts estimate the Iraqi government has sufficient funds to operate through mid-May without new oil sales, after which it would need to issue bonds or borrow money. The border crossing with Iran at Shalamcha has also experienced disruptions, with trade volumes declining due to power outages caused by airstrikes on the Iranian side of the crossing.