Oil crash puts Iraq on downgrade watch

2026-03-18 - 11:51

Shafaq News- Baghdad Iraq faces a potential credit downgrade after oil output plunged to about 1.2 million barrels per day (bpd) from 4.2 million bpd amid regional conflict, S&P Global said on Wednesday. Oil accounts for about 60% of GDP, 90% of government revenue, and 95% of exports, leaving the economy highly exposed to supply shocks, according to official Iraqi government data. In its report, S&P placed Iraq’s “B-” sovereign rating on CreditWatch negative, warning that disruptions linked to the Strait of Hormuz could strain fiscal and external stability. Lower output will cut revenue, tighten spending, and likely force the government to draw on reserves. Foreign reserves stood at about $97 billion in mid-February, covering roughly 10 months of external payments, with part held in gold, supporting debt servicing, including Iraq’s $2.8 billion bond. The drop follows disruptions to shipping through the Strait of Hormuz after Iran imposed restrictions in response to US-Israeli strikes. However, prolonged disruption could also weaken Iraq’s financial position through 2026, increasing downgrade risk.