Iran reopens Strait of Hormuz to Iraqi oil shipments: FT

 Iran has signaled a partial easing of restrictions in the Strait of Hormuz, allowing Iraqi oil shipments to pass through the vital corridor after weeks of disruption that rattled global energy markets, the Financial Times reported Sunday.

An Iraqi tanker, the Ocean Thunder, successfully navigated the strait along Iran’s coastline over the weekend, carrying roughly 1 million barrels of Basrah Heavy crude, according to shipping data cited by the newspaper. The passage marks one of the clearest signs yet that Tehran may be selectively reopening the waterway.

An Iranian military spokesperson said the exemption reflects Baghdad’s status as a friendly nation, emphasizing that restrictions remain in place only for countries deemed hostile. However, officials did not clarify whether the policy applies broadly to Iraqi-flagged vessels or specifically to cargo originating from Iraq.

Selective access could unlock millions of barrels

The move could pave the way for a significant volume of oil, potentially up to 3 million barrels per day, to re-enter global markets. That would help offset supply disruptions triggered by the recent conflict involving the U.S. and Israel and ease pressure on crude prices.

Still, the practical impact remains uncertain. Shipping companies may be hesitant to resume operations through the strait without stronger security assurances, and restarting production at scale is expected to take time.

Before the conflict escalated in late February, roughly one-fifth of the world’s oil supply flowed through the strait. Since then, Iran has effectively restricted access, permitting only a limited number of vessels described as “non-hostile.”

Iraq’s economy hit hard by export bottlenecks

For Iraq, the disruption has been severe. Oil exports, once around 3.4 million barrels per day, have plunged, forcing production cuts and filling storage facilities to capacity. The country has faced steep revenue losses, with estimates suggesting daily shortfalls in the hundreds of millions of dollars during March.

In response, Baghdad has explored alternative routes, including limited overland shipments through neighboring Syria, though such efforts have only marginally offset the losses.

The global market has also felt the strain. Supplies of heavier “sour” crude grades, typically sourced from the Middle East, have tightened sharply, creating strong demand for any available barrels.

OPEC+ increases offer limited relief

Meanwhile, OPEC+ has moved to raise output targets, approving modest increases for April and May. However, analysts say the near shutdown of the strait has limited the group’s ability to meaningfully boost exports, as producers struggle to move crude out of the Gulf.

If transit conditions stabilize, Iraq could ramp production to more than 4.3 million barrels a day under its current quota, providing a much-needed fiscal boost.