Iraq found a route for oil beyond Hormuz. Raw material prices reacted immediately

Crude oil prices fell on Wednesday morning after news that Iraq had signed an agreement allowing it to resume exports of crude oil to Turkey, bypassing the Strait of Hormuz. This is an important signal for the market because tensions in the Middle East and disruptions in oil transport since the beginning of the conflict have had a strong impact on global energy commodity prices.

After the announcement of the agreement, a barrel of WTI crude oil fell by 2.92%. and at 8.45 cost $93.40. During the morning, prices temporarily dropped to as low as $91.50. per barrel. Brent crude oil, in turn, fell by 1.40% to USD 101.97. Later in the day, the price stabilized closer to $94. per barrel. The market reaction showed that the mere information about the possibility of sending part of the exports via another route was perceived as a factor easing the pressure on supplies.

The authorities of the autonomous Kurdistan Region in northern Iraq announced that oil exports through the Turkish port of Ceyhan will be resumed from Wednesday. This route is of particular importance as it avoids transport through the Strait of Hormuz, which remains one of the most unstable points in the region under current conditions. Oil Minister Hajan Abdel-Ghani confirmed on Tuesday that an agreement had been reached. Prime Minister of the Kurdish government, Masrur Barzani, in turn, emphasized that exports are to be resumed as soon as possible, taking into account the difficult situation in Iraq.

The importance of this decision increases in the context of the decline in oil production caused by the war. Before the escalation of tensions, Iraq was producing about 4.3 million barrels a day, most of which was exported by sea. However, after Iran’s attacks on Iraqi energy infrastructure, production in southern oil fields dropped by 70%, to 1.3 million barrels per day. This is a very strong supply limitation, which additionally strengthened investors’ concerns about market stability.

The situation is also complicated by Iran’s blockade of the Strait of Hormuz. This is a key transport route for oil and natural gas, so blocking it increases tension on the market and increases the risk of further supply problems. On Tuesday, US President Donald Trump announced that navigation through the strait would soon be restored. Earlier, he also asked allies, including NATO countries, for support in the operation to unblock Hormuz. However, most countries, including Australia and Japan, refused to participate, pointing out that the US did not provide details of planned actions and NATO remains a defensive alliance.

At the same time, military tension around the strait itself was growing. US Central Command reported that an attack was carried out on Tuesday on Iran’s underground anti-ship missile stockpiles near Hormuz. Two-ton penetrating bombs were used to destroy these objects. As a result, the oil market remains very sensitive to any information regarding both exports and transport security in the region. Iraq’s decision to use an alternative route temporarily lowered prices, but did not remove the tensions that still weigh on the commodity market.