In a statement issued on Thursday, Iraq’s Oil Ministry said the country has repeatedly called for a reassessment of production baselines to better reflect the sustainable production capacities of member states and Iraq’s unique security and economic circumstances. The ministry noted that OPEC has already begun a process to review member countries’ production capacities.

The debate comes amid reports suggesting Iraq could consider leaving OPEC if its production quota is not raised. While Iraqi officials rejected claims that a withdrawal decision has been made, Oil Ministry spokesperson Salim Al-Rikabi stated that Iraq expects a fair increase in its quota and warned that the country may ultimately need to decide whether remaining in the organization serves its interests.

“Iraq has no intention of withdrawing from OPEC and remains committed to its mechanisms,” Al-Rikabi said, while adding that the organization must address Iraq’s production concerns.

Iraq, a founding member of OPEC, relies heavily on oil revenues, which account for nearly 90 percent of government income. The recent regional conflict and disruptions to shipping through the Strait of Hormuz significantly affected exports and reduced production across the country.

Several Iraqi oil fields were also targeted by drone attacks during the conflict, causing further disruptions to operations. Prior to the outbreak of war in February, Iraq produced approximately four million barrels of oil per day and exported around 3.5 million barrels daily, most of which passed through the Strait of Hormuz.

Following a recent agreement between Washington and Tehran that eased regional tensions and reopened maritime routes, Iraqi authorities hope to restore production to pre-war levels within the next two months.

The possibility of Iraq reconsidering its OPEC membership has drawn attention because it would represent another setback for the organization following the departure of the United Arab Emirates earlier this year. Baghdad, however, emphasized that all production-related issues should continue to be addressed through OPEC’s established technical and consensus-based mechanisms.

Iraq maintains that its history of wars, sanctions and recent security challenges justifies a higher production allocation and expects member states to take those factors into account when determining future quotas.

President Donald Trump and Vice President JD Vance have argued that the agreement, reached following high-level negotiations last week, would direct billions of dollars in previously restricted Iranian assets toward purchases of U.S. food and medical supplies, including corn, wheat and soybeans.

The disagreement emerged as Washington and Tehran began implementing a 60-day memorandum of understanding designed to halt hostilities and create space for broader negotiations on unresolved issues between the two countries.

Under the arrangement, Iran would regain access to international oil markets during the negotiation period, while restrictions on certain Iranian assets held abroad would be eased. The agreement would also facilitate the reopening of the Strait of Hormuz, a critical maritime corridor for global energy shipments.

Responding to criticism that the deal does not directly address Iran’s nuclear program, ballistic missile development or support for regional armed groups, Trump defended the agreement on Tuesday, saying Iranian assets would remain under U.S.-controlled escrow mechanisms and be used to purchase goods exclusively from American suppliers.

The administration has presented the proposal as an economic benefit for U.S. agriculture, a sector that has faced fluctuating export demand in recent years.

Iranian officials, however, publicly disputed Washington’s interpretation of the agreement. Foreign Ministry spokesperson Esmail Baghaei said purchasing decisions would be determined by market considerations, including quality and pricing, rather than by conditions imposed by the United States.

Iran’s ambassador in Geneva, Ali Bahreini, also rejected suggestions that Washington or third countries would control the use of Iranian assets once released, stating that decisions regarding the funds would remain solely in Iran’s hands.

A U.S. official, speaking on condition of anonymity, dismissed the contradiction and suggested Iranian leaders were tailoring their comments for domestic audiences.

The dispute has fueled uncertainty among sanctions experts and former officials familiar with the mechanics of financial restrictions on Iran.

Under previous sanctions regimes, proceeds from Iranian exports, including oil and electricity sales, were often deposited into escrow accounts abroad and could only be accessed for approved humanitarian transactions such as food and medicine purchases.

On Monday, the U.S. Treasury authorized the sale of Iranian oil, petrochemicals and petroleum products through Aug. 21 as part of the interim arrangement. The authorization did not specify whether released funds would remain subject to escrow restrictions.

Analysts say the legal and financial mechanisms governing the assets remain unclear. Richard Nephew, a former sanctions official who worked on Iran policy during the Obama and Biden administrations, said Washington could attempt to require foreign financial institutions to direct funds toward purchases from U.S. suppliers, but enforcing such conditions could prove difficult.

Joseph Glauber, a research fellow emeritus at the International Food Policy Research Institute, noted that Iran already sources significant quantities of agricultural products from countries including Brazil, India, Türkiye, Canada, Australia, Argentina and members of the European Union. Redirecting those purchases exclusively toward American exporters could disrupt established trade relationships.

Supporters of a tougher sanctions policy have also sought clarification. Richard Goldberg, a former Trump administration official now affiliated with the Foundation for Defense of Democracies, said additional details would be needed to determine whether the agreement genuinely restricts Iranian purchases to U.S. agricultural products.

The competing interpretations underscore broader questions surrounding the agreement, whose final terms and enforcement mechanisms remain under negotiation as Washington and Tehran continue talks over a more comprehensive settlement.

The move expands an emergency arrangement under which Iraq has already been exporting fuel oil through Syria’s port of Baniyas following the effective closure of the Strait of Hormuz, a critical maritime corridor through which the vast majority of Iraqi crude exports traditionally pass.

Iraqi officials said the strategy will remain in place even after maritime traffic through Hormuz normalizes, reflecting a broader government effort to diversify export routes and reduce dependence on a single corridor.

“The Iraqi government and the oil ministry attach the highest importance to diversifying crude export routes, particularly through Syrian territory,” Iraqi Oil Ministry spokesman Saleem Al-Rikabi told Reuters.

Al-Rikabi said state oil marketer SOMO was continuing discussions with Syrian authorities aimed at expanding energy exports through Iraq’s western neighbor.

Iraq typically exports around 3.6 million barrels of crude oil per day, with approximately 3.4 million barrels previously shipped through southern terminals near Basra before the conflict disrupted Gulf trade routes.

The closure of Hormuz forced Baghdad to seek alternative export channels as storage facilities filled and outbound shipments became constrained.

An interim solution introduced in April involved transporting Iraqi fuel oil by tanker truck across Syria to Baniyas for re-export through the Mediterranean.

Syrian officials said preparations are underway to expand the arrangement. Mohammed Al-Ahdab, head of the media office at the Syrian Petroleum Company, said operations at Baniyas were continuing despite expectations that the strait could reopen.

A Syrian Energy Ministry official said two additional unloading areas and supporting facilities would become operational within a week to accommodate Iraqi crude oil and naphtha shipments.

According to Iraqi oil officials, crude exports through Syria could initially reach around 50,000 barrels per day once loading infrastructure is completed. Tanker-truck shipments are expected to begin in early July, while SOMO plans to establish offices in Baniyas to support operations.

The expansion represents a significant opportunity for Syria, which is seeking to rebuild its economy and reconnect with regional markets after years of conflict and international isolation.

Officials said Syria is earning transit-related income from the movement of Iraqi fuel products, although details of the financial arrangements have not been disclosed.

Shipping data cited by industry sources indicate that Iraqi fuel oil exported through Syria has already reached destinations in Africa and Europe, including a tanker that arrived in Alexandria, Egypt, earlier this month.

The overland route faces logistical and security challenges. Roads linking Iraq and Syria have suffered extensive war-related damage, while fuel transport operations have encountered accidents and occasional disruptions from local protests.

At Baniyas, Iraqi fuel oil is being unloaded into storage facilities connected to marine export infrastructure rather than processed domestically, according to a source familiar with the operations.

Syrian authorities are also exploring longer-term solutions, including the rehabilitation of damaged pipeline infrastructure. Officials said the Iraq-Syria pipeline network has the capacity to transport up to 300,000 barrels per day if restored to operational status.

The initiative underscores how the disruption of Hormuz has accelerated efforts by regional producers to develop alternative export routes and strengthen resilience against future geopolitical shocks affecting global energy markets.

The conflict exposed the vulnerability of Middle Eastern energy exporters to disruptions in one of the world’s most important maritime chokepoints. The Strait of Hormuz, through which a significant share of global oil and liquefied natural gas shipments passes, became the focal point of market instability after Iran imposed a blockade that disrupted energy flows across the Gulf.

The closure stranded roughly one-fifth of global oil and LNG supplies, forcing producers to curtail approximately 11 million barrels per day of oil output while disrupting refinery operations and liquefied natural gas facilities throughout the region.

Although Washington and Tehran have since agreed to pursue negotiations toward a permanent peace arrangement, energy producers and policymakers are increasingly treating future disruptions as a recurring strategic risk rather than a remote possibility.

As a result, Gulf governments are prioritizing investments in pipelines, export terminals and overseas assets to reduce dependence on Hormuz and strengthen resilience against future crises.

Saudi Arabia is widely viewed as the region’s strongest example of successful diversification. Long before the recent conflict, state-owned Saudi Aramco developed a 1,200-kilometer pipeline linking oil fields in the Gulf to the Red Sea port of Yanbu. The infrastructure enabled the kingdom to redirect a substantial portion of its exports away from Hormuz during the crisis.

The economic benefits of that strategy became evident as Saudi Arabia experienced a comparatively limited impact from the disruption. According to International Monetary Fund projections cited in the analysis, the Saudi economy is expected to grow by 3.1 percent in 2026, representing a relatively modest downgrade from pre-war forecasts.

The United Arab Emirates also benefited from existing infrastructure. The country continued exporting significant volumes of crude through the Fujairah terminal on the Gulf of Oman, despite disruptions caused by military activity. Abu Dhabi is now accelerating plans to expand export capacity through a second pipeline to Fujairah, with completion targeted for 2027.

Iraq faces a more complicated challenge because much of its production is concentrated in the south and remains heavily dependent on Gulf shipping routes. Iraqi authorities and energy companies are examining possibilities for expanding northern export corridors through Turkiye and Syria, though political instability and security concerns continue to complicate such plans.

The situation is particularly difficult for Qatar and Kuwait, both of which lack substantial alternative export routes outside the Strait of Hormuz.

For Qatar, one of the world’s largest exporters of liquefied natural gas, bypassing Hormuz would likely require cooperation with neighboring states through pipeline networks crossing the United Arab Emirates, Oman or Saudi Arabia. Such projects would involve major financial investments and could increase Doha’s dependence on regional partners, introducing new strategic considerations.

Kuwait faces a similar predicament, with future diversification efforts likely to require deeper energy integration with Saudi Arabia and potentially broader regional infrastructure cooperation.

Beyond pipeline development, Gulf energy producers are increasingly pursuing geographic diversification through overseas investments. National energy companies have expanded portfolios across international oil, gas, refining, storage and renewable energy projects to create revenue streams less exposed to regional geopolitical risks.

Companies including QatarEnergy and Abu Dhabi National Oil Company have already established significant international footprints, and analysts expect such investments to accelerate as governments seek greater protection from future disruptions in Gulf shipping lanes.

The shift reflects a broader reassessment of energy security across the region. Infrastructure once viewed as supplementary is increasingly being treated as essential, while export diversification has moved from a long-term strategic objective to an immediate economic priority.

As Gulf producers recover from the effects of the Iran conflict, decisions on pipelines, transport corridors and overseas investments are expected to influence trade patterns, diplomatic relationships and energy markets well beyond the Middle East, redefining regional economic architecture in the years ahead.

“What they said, including their weak and pathetic statement on having a deal, bears no relation to the truth. Very dishonorable people to deal with. With them, there is no such thing as dealing in good faith. AMAZING!” Trump wrote, adding that Tehran “better get their act together, and FAST!”

The comments followed Trump’s statement on Thursday that he was calling off new strikes on Iran because a deal had been reached, marking a shift in tone amid conflicting accounts of the agreement’s status.

On Friday, a senior Iranian source told Reuters that the draft under discussion would include the lifting of sanctions on Iranian oil exports and the unfreezing of billions of dollars in Iranian assets, alongside a cessation of hostilities across multiple fronts, including in Lebanon. The source did not specify what Tehran would offer in return.

The reported framework also suggests that nuclear issues would be deferred to later negotiations, even as Washington has repeatedly said it seeks to ensure Iran does not develop a nuclear weapon. Iran has consistently denied pursuing such a capability.

Iranian state media said the draft would not require Tehran to relinquish control over the strategic Strait of Hormuz, a vital global shipping route. The Islamic Republic has maintained increased control over traffic through the waterway since the outbreak of conflict with the United States and Israel earlier this year, allowing only limited passage and requiring vessels to seek approval from its armed forces.

Iran has framed the outlined terms as preserving its authority over the strait, while emphasizing that final details of the agreement remain under discussion. Meanwhile, Trump’s remarks underscored continuing uncertainty over whether both sides share a common interpretation of the proposed deal’s scope and obligations.

Kharg Island, located about 15 to 16 nautical miles off the coast of Iran, serves as a critical export hub handling roughly 90 percent of Iran’s crude oil shipments, making it a central node in the country’s energy infrastructure and a key source of revenue.

Trump has publicly suggested the United States could take control of the island to assert influence over Iran’s oil and gas sector, while also acknowledging that a ground operation would be difficult and politically sensitive. In remarks cited by US media, he indicated reluctance to deploy ground troops, while suggesting limited military options could still be considered.

The United States military has already conducted strikes on the island earlier this year, targeting more than 90 military installations, including naval mine storage sites and missile facilities, while reportedly sparing oil infrastructure to avoid long-term economic disruption, according to Central Command assessments cited in reporting.

However, analysts cited by Arab News and Reuters warned that any attempt to physically occupy the island would likely escalate the conflict. Experts from the Foundation for Defense of Democracies said an occupation could prolong the war and fail to deliver a decisive strategic outcome.

Former US Central Command commander Joseph Votel was cited as saying that while a relatively small force could theoretically hold the island, such troops would require extensive logistical support and would remain highly vulnerable to attack.

Iranian officials have reinforced defenses around the island, deploying air-defense systems, mines, and other military assets in surrounding waters. Iranian parliamentary speaker Mohammad Bagher Ghalibaf warned that Iranian forces were prepared to respond forcefully to any incursion, including targeting regional infrastructure.

Military analysts also cautioned that any US presence could be exposed to asymmetric tactics, including drone surveillance and propaganda dissemination of battlefield losses, potentially increasing political pressure on Washington.

Despite heightened tensions, Trump has recently indicated a pause in new strikes following what he described as progress in negotiations with Tehran, suggesting that diplomatic channels remain active alongside military signaling.

In a social media post, Trump said the United States would strike Iran “VERY HARD TONIGHT” and declared that Washington would “assume total control” of Iran’s oil and gas sector, including the strategically important Kharg Island export terminal, at some point in the future.

Trump did not provide details on how such a move could be carried out. Kharg Island is the main hub for Iranian crude exports and a critical source of revenue for the country’s economy. The island is located off Iran’s Gulf coast and serves as a central artery for the nation’s energy shipments.

The comments came as the U.S. military launched a new wave of strikes against Iranian military targets, broadening a campaign that appeared more extensive than operations conducted a day earlier.

U.S. Central Command (CENTCOM) said American forces carried out additional strikes against Iranian surveillance systems, communications infrastructure and air defense facilities. According to the command, U.S. Marine Corps, Air Force and Navy assets employed precision-guided munitions against targets viewed as threats to American personnel and commercial maritime traffic in regional waters.

CENTCOM described the operations as defensive measures conducted in response to what it called continuing Iranian aggression.

Iran condemned the attacks, with the Foreign Ministry saying the latest U.S. military action effectively rendered a ceasefire that had held for nearly two months “practically meaningless.”

In a statement, the ministry said the strikes represented a violation of international norms and warned that responsibility for any serious consequences would rest with U.S. leaders.

Speaking at the White House, Trump said military pressure on Iran would continue while diplomatic channels remained open.

“We’re going to be attacking them very hard,” Trump told reporters, while reiterating his administration’s desire for a negotiated settlement.

The president said Washington sought an agreement that would permanently prevent Iran from acquiring a nuclear weapon. He claimed Tehran had accepted the principle of foregoing nuclear arms but said a final accord had not been concluded.

Defense Secretary Pete Hegseth echoed the administration’s warnings during a visit to the U.S. naval base at Guantanamo Bay, Cuba.

Hegseth said the strikes were intended to protect American forces and cautioned Tehran against escalating the confrontation further.

“Iran would be unwise to challenge us further,” he said.

The latest exchange has heightened concerns about a broader regional conflict involving the United States and Iran, while adding uncertainty to energy markets and international diplomatic efforts aimed at reducing tensions in the Middle East.

Despite the military escalation, U.S. officials continued to emphasize that diplomacy remains Washington’s preferred path, provided any future agreement includes lasting guarantees that Iran will not develop a nuclear weapons capability.

Citing U.S. officials familiar with the matter, the report said Trump concluded during a White House Situation Room meeting on Monday that both resuming bombing campaigns and fully stepping back from the conflict carried greater risks than maintaining a naval squeeze on Iran’s oil exports and shipping routes.

According to the report, Trump believes Iran is not negotiating in good faith and wants Tehran to suspend uranium enrichment for 20 years while accepting strict long-term restrictions on its nuclear activities. Officials said the administration views the blockade as a way to intensify pressure without immediately reopening large-scale military operations.

Trump signaled frustration publicly on Wednesday, writing on his Truth Social platform that Iran “can’t get their act together” and warning Tehran to “better get smart soon.”

“Iran can’t get their act together. They don’t know how to sign a nonnuclear deal.They better get smart soon!” Trump posted, alongside an image carrying the caption “NO MORE MR. NICE GUY!”The reported strategy would rely on the U.S. Navy continuing efforts to restrict vessels traveling to and from Iranian ports, further tightening pressure on oil exports that are central to Iran’s economy.

Analysts say the approach risks extending instability around the Strait of Hormuz, one of the world’s most critical energy transit routes.Oil markets reacted sharply to reports of a prolonged blockade, with Brent crude rising to a one-month high above $114 a barrel on concerns over sustained supply disruption and continued uncertainty over shipping through the Hormuz corridor.

The White House has not formally announced a policy shift, and Iranian officials have not publicly responded to the Wall Street Journal report.The decision suggests Washington may be preparing for a prolonged standoff in which active fighting remains limited but diplomacy remains frozen, leaving the conflict in what analysts describe as a “no-deal, no-war” phase.

Trump said he had ordered envoys Steve Witkoff and Jared Kushner not to travel to Islamabad, where mediation efforts had been centered following the arrival of Iranian Foreign Minister Abbas Araghchi for talks with Pakistani officials.

Speaking before departing Florida and later in comments to Fox News, Trump said the revised Iranian offer failed to meet U.S. expectations and dismissed the value of sending negotiators for extended talks.“I’ve told my people a little while ago they were getting ready to leave, and I said, ‘Nope, you’re not making an 18-hour flight to go there,’” Trump said, according to Fox News.

“We have all the cards. They can call us anytime they want.”In a post on Truth Social, Trump added that there was “tremendous infighting and confusion” within Iran’s leadership and said, “Nobody knows who is in charge, including them.”

The cancellation dealt a setback to mediation efforts in Islamabad, where Araghchi had concluded meetings with Pakistani leaders without direct contact with U.S. representatives.

Araghchi described the visit as “very fruitful,” while Iranian President Masoud Pezeshkian told Pakistani Prime Minister Shehbaz Sharif that Tehran would not accept what he called “imposed negotiations” conducted under threats or blockade.

Iran urged Washington to remove operational restrictions, including measures affecting Iranian ports, while maintaining that it would not accept maximalist demands.“Principally, Iranian side will not accept maximalist demands,” an Iranian diplomatic source in Islamabad told Reuters.

Tensions remain elevated across the region despite a ceasefire currently in force after a conflict that began on Feb. 28 with U.S.-Israeli airstrikes on Iran. Tehran later launched retaliatory strikes against Israel, U.S. military bases and Gulf states, escalating fears of a broader regional war.

The standoff has also disrupted maritime traffic through the Strait of Hormuz, a critical global energy corridor, while U.S. restrictions on Iranian oil exports remain in place, pushing energy prices to multi-year highs and adding pressure to global inflation and growth.

In Israel, Prime Minister Benjamin Netanyahu ordered forces to strike Hezbollah targets in Lebanon “forcefully,” testing a fragile three-week ceasefire and underscoring the broader instability surrounding the negotiations.

White House press secretary Karoline Leavitt had said earlier that Washington had seen some progress from Iran in recent days and hoped for further movement over the weekend.Vice President JD Vance, who led an earlier unsuccessful round of indirect talks in Islamabad this month, had also been prepared to travel again if negotiations advanced.

Defense Secretary Pete Hegseth said Iran still had an opportunity to reach an agreement if it made verifiable commitments on its nuclear program.“All they have to do is abandon a nuclear weapon in meaningful and verifiable ways,” Hegseth said.

Iran’s foreign ministry later confirmed that no direct meeting with U.S. officials had been planned during Araghchi’s visit and said Tehran would instead convey its position through Pakistan as mediator.

Even before the latest hostilities, analysts described Iran’s economy as deeply fragile, weighed down by sanctions, energy imbalances, inflation and declining exports. The impact of renewed strikes and the effective closure of Hormuz a critical artery for global energy shipments has sharply intensified those pressures.

The blockade threatens more than 90% of Iran’s annual trade, estimated at over $100 billion, according to analysts, cutting off vital oil exports that account for roughly 80% of government revenue. Estimates cited by experts suggest losses of around $435 million per day, potentially exceeding $13 billion monthly.

Energy infrastructure constraints are compounding the crisis. With limited storage capacity and continued production, Iran risks being forced to halt oil output within weeks, raising the possibility of long-term damage to oil fields and a permanent reduction in production capacity.

On the domestic front, economic indicators point to severe distress. The Iranian rial has sharply depreciated, while food inflation has surged into triple digits, eroding purchasing power and fueling social discontent.

Shortages of energy have also disrupted key industries such as steel, cement and petrochemicals.The blockade’s effects are further magnified by limited alternative trade routes. Infrastructure outside the Gulf, including overland corridors and non-Hormuz ports, can handle only a fraction of normal throughput, leaving Iran with few options to offset lost maritime access.

Internal divisions are also emerging over the management of foreign currency revenues and economic policy, with some officials warning that significant portions of export earnings are not reaching state coffers.

Former Iranian foreign minister Mohammad Javad Zarif has called for compromise, urging Tehran to consider limiting its nuclear program and reopening Hormuz in exchange for sanctions relief to prevent further economic deterioration.Analysts say the government’s response is driven less by economic logic than by strategic considerations.

Sanam Vakil of Chatham House said the conflict is viewed by Iran’s leadership as existential, limiting the likelihood of policy shifts despite economic strain.The longer-term outlook remains uncertain.

Researchers at Royal United Services Institute warn that postwar recovery could be hampered by damaged infrastructure, reduced access to regional financial networks and strained ties with Gulf partners, particularly the United Arab Emirates, a key trade hub for Iran.

With reconstruction costs expected to be substantial and trade channels constrained, the economic consequences of the conflict may prove more enduring than the military phase itself.