Iraq: Effects on Logistics, Trade, and Construction
Executive Summary
Iraq has emerged across multiple independent analyses as the economy most structurally exposed to this war, with between 90% and 97% of its crude exports historically routed through the Strait of Hormuz and oil accounting for roughly 90% of state budget revenue. A drone attack on a Basra compound housing offices used by the U.S. firm Halliburton underscored how directly the conflict reached Iraq's oil-sector infrastructure, while Iran-aligned strikes on the Kurdistan Region — including Erbil International Airport and the U.S. Consulate there — numbered close to 500 by the time a ceasefire was announced on 8 April 2026.
Key Takeaways
Southern Iraq's oil production fell by more than 70% once the Hormuz blockade took hold, with the Zubair field near Basra dropping from roughly 400,000 to 250,000 barrels a day.
Baghdad and the Kurdistan Regional Government agreed to push 250,000 barrels a day through the reactivated Kirkuk-Ceyhan pipeline to Turkey as a Hormuz-independent export route.
Turkey's $15–20 billion in annual bilateral trade with Iraq is exposed to a real demand shock as Baghdad's liquidity tightens.
Reconstruction across Basra, Nineveh, and Anbar is a bright spot, but export-diversification infrastructure projects remain exposed to delay from Iraq's fragmented political landscape.
Logistics
Southern Iraq's oil production fell by more than 70% once the Hormuz blockade took hold, and the Zubair field near Basra alone dropped from roughly 400,000 to 250,000 barrels a day under sustained attack; import volumes reaching Iraq's ports were cut roughly in half over the same period. In partial response, Baghdad and the Kurdistan Regional Government agreed in mid-March to push 250,000 barrels a day through the reactivated Kirkuk-Ceyhan pipeline to Turkey, while renewed discussion of a Basra-to-Aqaba route through Jordan and a Basra-to-Haditha "New Levant" pipeline reflects how seriously alternative, Hormuz-independent export capacity is now being pursued.
Trade
Turkey alone represents $15–20 billion in annual bilateral trade with Iraq, built substantially on Turkish exports of grains, pharmaceuticals, furniture, and construction materials, and that relationship is now exposed to a real demand shock as Baghdad's liquidity tightens — analysts have specifically flagged Turkish SMEs facing cancelled orders and uncollectible receivables as a consequence. Iraq's oil revenue, funneled through an account at the Federal Reserve Bank of New York with a roughly three-month lag before reaching Baghdad, gives the country a partial fiscal cushion, with reserves estimated to cover around 12 months of imports at 2025 levels if the conflict drags on.
Construction
Reconstruction activity across Basra, Nineveh, and Anbar has been a genuine bright spot for Iraq's construction sector independent of the war, and new energy infrastructure — including a planned LNG regasification terminal intended to reduce Iraq's one-third dependence on Iranian gas for its power grid — represents real near-term demand. That said, the same pipeline and infrastructure projects central to Iraq's post-war export diversification, including the Basra-Aqaba and Development Road proposals, remain exposed to delay from the country's fragmented political landscape and Iran-aligned factions with a direct interest in preserving Iraq's dependence on existing routes.
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Bahrain: Effects on Logistics, Trade, and Construction
Bahrain was among the hardest-hit Gulf states economically, compounding a debt position that already ranked among the most burdened in the world before the war began. Iran struck the U.S. Fifth Fleet headquarters in Manama directly, and the broader Strait of Hormuz crisis, combined with Iranian drone attacks, cut into aluminum and oil exports that together provide more than two-thirds of government revenue.
Jordan: Effects on Logistics, Trade, and Construction
On 28 February 2026, the United States and Israel launched Operation Epic Fury against Iran, killing Supreme Leader Ali Khamenei and triggering a regional war that has killed thousands in Iran and Lebanon and displaced millions across the region. Jordan absorbed more than 200 Iranian drones and missiles aimed at U.S. and local targets on its territory, including one strike that destroyed a THAAD missile-defense radar base.