Iraq's Oil Routes Stall as Hormuz Blockade Enters Its Fourth Month

Iraq's Oil Routes Stall as Hormuz Blockade Enters Its Fourth Month Iraqi oil exports are losing roughly 100 million barrels a week with no viable bypass, as the Hormuz blockade approaches four months. NBP gas on the UK benchmark settled at €56.53/MWh on Thursday (2026-07-16), up 22.34%, while German power baseload front-month closed at €120.05/MWh, up 13.63%, as European energy markets continued to price in the strain of a Strait of Hormuz blockade approaching four months. ICE Brent crude front-month held at $84.87 per barrel as of early Friday (2026-07-17).¹ For Iraq, the closure is a slow-motion fiscal crisis. Unlike Saudi Arabia and the UAE, Iraq has no pipeline capable of diverting meaningful export volumes away from the strait, and available regional bypass infrastructure covers only a fraction of normal throughput. A commodities investment manager speaking at Montel's German Energy Day on Thursday (2026-05-21) said Europe's current price shock would turn into a supply crisis if the blockade extended to a full year. Iraq's exposure is more direct: its revenues depend almost entirely on exports that previously transited Hormuz.^1,6 EIA data show the strait carried an average of 21 million barrels per day in 2022, accounting for roughly 21% of global petroleum liquids consumption. Effective unused bypass capacity across existing regional pipelines amounts to around 3.5 million barrels per day by EIA estimates, leaving a gap between bypass and normal throughput of close to 18 million barrels per day.³ Saudi Aramco's East-West crude pipeline normally runs at around 5 million barrels per day; it was expanded to 7 million in 2019. The UAE links its onshore fields to the Fujairah terminal via a 1.5 million barrel per day line, which handles a maximum of 1.8 million barrels per day, according to CNBC. Sultan Ahmed Al Jaber, ADNOC chief executive, told the network on Wednesday (2026-05-20) that the UAE was roughly 50% through building a second bypass pipeline.^3,2 The cumulative losses are already large. Al Jaber said more than 1 billion barrels had been lost to the closure by late May (2026-05-20), with nearly 100 million additional barrels forfeited each week the strait remained shut. That rate of loss makes the fiscal arithmetic for Baghdad extremely difficult to manage.² A ceasefire would not bring fast relief. Al Jaber said it would take at least four months after any end to the conflict to ramp flows back to 80% of normal levels. Under that timeline, Iraqi export revenues would remain severely constrained well into 2027, even in an optimistic scenario.² The regional composition of Hormuz trade compounds the problem. EIA data show that around 82% of the crude oil and condensate transiting the strait in 2022 moved to Asian markets. JKM Asian LNG was at $19.92 per MMBtu as of Friday (2026-07-17), reflecting how much buyers in the region are paying to source alternative supply.³ Inside Iraq, the disruption deepens existing tensions. Energy sector leaders have argued that militia groups operating near hydrocarbon infrastructure represent a persistent threat to long-term investment, while Iraqi authorities insist that all hydrocarbon revenues ultimately belong to the state, a dispute that has clouded the legal framework international operators require. The Economist described energy analysts as having long modelled a scenario involving Iran lashing out at oil-rich neighbors and a strait blockade, treating both as worst-case outcomes.^6,5 ICE Endex TTF front-month gas traded at €55.28/MWh as of Friday (2026-07-17), with contrarian signals suggesting some participants are positioned for a near-term pullback on the contract. VIX rose 6.76% to 16.73 on the session. CNBC reported in late May (2026-05-20) that there was still little clarity on when or how the U.S.-Iran conflict could be resolved — each additional week the strait stays closed adds another estimated 100 million barrels to the cumulative supply gap.^2,4