11APR

Iran Exempts Iraq From Hormuz as Oil Output Collapses

3 min read

16:48UTC

Iraq lost three-quarters of its oil production to the blockade. Tehran granted relief and called it brotherhood.

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ConflictAssessed

Key takeaway

Iran is converting Hormuz from a blockade into a bilateral licensing system it controls.

Iran exempted Iraq from all Strait of Hormuz restrictions on 5 April, citing "brotherly" ties. ¹ Iraq's oil production had collapsed from 4.3 to 1.2 million barrels per day under the blockade, a 72% drop costing roughly $200 million daily. Oil is the single revenue source that funds Iraq's government. The exemption is a survival measure for both sides: Iraq's economy cannot function without Hormuz access, and Iran needs at least one friendly neighbour whose state has not been destroyed by Iranian policy.

Weekly Hormuz transits rose to 53 last week, up from 36, but still down over 90% from the pre-war normal of roughly 966. The increase is driven entirely by bilateral exemptions: the Philippines, France , Japan, Oman, and now Iraq. Each deal further normalises Tehran's sovereignty claim over international waters. The coalition posture Washington maintained since the blockade began is dissolving into a series of licensing arrangements administered by Tehran.

Ali Vaez of the International Crisis Group assessed that Hormuz control is "much more potent than even a nuclear weapon." Former CIA Director Bill Burns said Tehran has "tasted its power and leverage and won't soon give it up." US intelligence simultaneously assessed Iran will not open Hormuz "any time soon." ²

Deep Analysis

In plain English

Iran is blocking most ships from passing through a narrow waterway that most of the world's oil passes through. Iraq, which is Iran's neighbour and has historically friendly relations with Tehran, was losing three-quarters of its oil income because of the blockade. Iran has now said Iraq's ships can pass through. This sounds like a concession, but it is actually something more significant: Iran is deciding country by country who gets to use an international waterway, and charging them for the privilege. That is a fundamental change in who controls global oil shipping.

Source Landscape

This story draws on mixed-leaning sources from Qatar and Israel

Qatar

Israel

LeftRight

Primary parallel: The Allied blockade of Germany in World War I — initially comprehensive, progressively eroded by neutral exemptions for Scandinavian states, ultimately maintained as an instrument of pressure through selective enforcement. The Hormuz bilateral exemption system follows the same structural trajectory: a nominally total blockade converting into a managed licensing regime administered by the blocking power.

Counter-parallel: US oil sanctions on Iran from 2018 — also built around bilateral exemptions for India, China, South Korea, and others. Those exemptions steadily eroded the sanctions architecture until they were eliminated. Iran appears to have learned from watching its own sanctions erosion and is now applying the exemption model offensively.

Iraq's 72% oil production collapse from 4.3 to 1.2 million barrels per day costs Baghdad approximately $200 million daily. Oil is Iraq's sole material revenue source, funding 90% of government expenditure. Without Hormuz access, Iraq faces a fiscal crisis within weeks.

The exemption does not restore Iraq's full production: ships must still transit the Larak Island IRGC corridor, paying in Iranian rial. Each Iraqi barrel that transits contributes to the 53 weekly transits counted last week, still down 90% from pre-war baseline. The economic relief is partial; the political signal to Arab states watching the bilateral exemption system is total.

Consensus view: International Crisis Group's Ali Vaez and former CIA Director Bill Burns both assess that Iran will not relinquish Hormuz control voluntarily, having assessed the strait as more strategically valuable than its nuclear programme. Each bilateral exemption reinforces this assessment by demonstrating that Tehran can manage the blockade selectively without global coalition forming against it.

Counter-view: Carnegie Endowment's Karim Sadjadpour argues the Iraq exemption exposes a structural flaw in Iran's Hormuz strategy: a blockade that Iran must selectively abandon to prevent the economic collapse of its closest ally is not a sustainable strategic instrument.

Key tension: Whether Iran's bilateral exemption system is a sign of Hormuz leverage being strategically managed or of the blockade becoming unworkable under its own weight.

First Reported In

Update #59 · Day 37: A Ground War Inside Iran That Nobody Will Name

Al Jazeera· 5 Apr 2026

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Causes and effects

This Event

Iran Exempts Iraq From Hormuz as Oil Output Collapses

Each bilateral Hormuz exemption normalises Iran's sovereignty claim over international waters and fragments the collective Western posture against the blockade.

Led to

Iran's Hormuz Toll Matures Into Permanent Institution

Iraq's Hormuz exemption (ID:1981) is part of the bilateral deal pattern driving the toll system's normalisation.

Occurred 6 Apr 2026

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IDF Strikes Iraq-Iran Border Crossing at Shalamcheh

Iraq's Hormuz exemption from Iran (ID:1981) contrasts with the IDF striking Iraq-Iran border infrastructure.

Occurred 5 Apr 2026

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Different Perspectives

Rafael Grossi, IAEA Director General

Grossi's Update 349 of 7 May recorded a drone strike on ZNPP's radiation monitoring laboratory on 3 May. Rosatom's 17 May public attack on the Secretariat's neutrality degrades the diplomatic ground Grossi needs for the sixth repair ceasefire at day 60 on the single backup line.

Indian Government / Embassy Moscow

The Indian Embassy in Moscow confirmed on 18 May that an Indian national was killed and three hospitalised at a refinery construction site in the 17 May barrage. India is among the largest buyers of discounted Russian crude; the fatality forces a diplomatic protest without changing the purchasing posture.

Recep Tayyip Erdogan, Turkish President

Erdogan met Zelenskyy in Ankara for nearly three hours on 15 May before the Istanbul session, recovering Turkey's 2022 mediator role and reducing Trump's leverage by hosting bilateral talks without Washington in the room. Turkey hosts the NATO Ankara summit on 7-8 July; the Istanbul format gives Erdogan standing at both tables simultaneously.

Viktor Orban / Hungarian Government

Budapest's new cabinet, formed 12 May, holds the institutional veto point on the EU tranche disbursement ahead of the first-half June window. Hungary has previously leveraged EU loan tranches to extract bilateral concessions; the combination of a fresh cabinet and a tight disbursement timeline makes Budapest the single highest-leverage actor in the EU track this fortnight.

European Council / Commission

The Commission is preparing a three-document disbursement package for the 9.1-billion euro first tranche of the EU loan to Ukraine, targeting first-half June, but delivery depends on the Magyar cabinet, which formed on 12 May, not blocking the mechanism. The 20th sanctions package remains in force against Russia.

Donald Trump / US Treasury

Treasury issued GL 134C with a 48-hour gap after GL 134B expired, confirming the waiver series functions as permanent monthly management rather than a wind-down instrument. Washington was absent from the Istanbul room; Treasury Secretary Bessent framed the Cuba carve-out as protecting 'most vulnerable nations', maintaining the fiction that the 30-day bridge has a humanitarian rationale.