Global Energy Shock Deepens as Iraq Seeks Export Fix, Bakken Faces Uncertainty

The economic shock from the ongoing closure of the Strait of Hormuz is deepening, with new warnings for the UK economy and a scramble by Iraq to rebuild oil exports, according to global reports. For Bakken operators, the sustained global supply disruption underscores a volatile price environment and the strategic importance of stable pipeline access.

Britain's independent fiscal watchdog, the Office for Budget Responsibility (OBR), warned that government borrowing is set to spike due to the Iran war, according to OilPrice.com. The OBR admitted it underestimated the effects of the last energy price shock from the Ukraine war and is applying those lessons to the current crisis. Oil prices have jumped around 40% since the war began in March, with European wholesale gas prices doubling. Economists warn stalled peace talks will prolong disruption to the critical Hormuz shipping lane.

The Bank of England warned in a worst-case scenario that continued disruption would push UK inflation above six percent and force it to reverse all interest rate cuts made in the last two years, OilPrice.com reported. The OBR had previously estimated that a major energy supply cut could force the UK government to borrow an average of £23.1 billion more per year. International Energy Agency chief Fatih Birol said the current blockade is more serious than the supply shocks in "1973, 1979 and 2022 together."

Meanwhile, Iraq is working to restart production and build export routes that bypass the Persian Gulf entirely, according to a separate OilPrice.com report. National output has climbed back to roughly 1.5-1.6 million barrels per day (bpd) after collapsing due to the Hormuz crisis, though this remains far below the over 4 million bpd produced before the war. With over 90% of its exports traditionally moving through the Gulf, Iraq's seaborne crude exports collapsed by more than 97% in May to just 96,000 bpd.

In response, the Iraqi cabinet this week approved plans to expand exports through the Iraq-Turkey pipeline to the Mediterranean port of Ceyhan. The goal is to increase flows from roughly 220,000 bpd today to as much as 770,000 bpd within two and a half months. Officials are also examining additional export corridors through Syria and Jordan.

The prolonged global supply disruption arrives as the Bakken industry faces its own political uncertainty. According to a summary from Bing News, North Dakota elected officials are pushing for rapid progress on next-generation oil production technology before a potential change in the federal administration, a situation oil and gas executives describe with the phrase "time is the enemy."