War Impacts Energy Lifeline: Iraqi Oil Companies' Output Drops Over 70%, Calls for Foreign Firms' "Exemption from Liability," Iran Responds to US "Sanctions Relief"

On Friday, March 20, as the U.S.-Israel military operation against Iran enters its 21st day, reports from Chinese and international media indicate that the Middle Eastern energy system is experiencing systemic shocks: Iraq is preparing to relax contractual restrictions on foreign oil companies, Iran has strongly responded to U.S. claims of “easing sanctions,” and regional production and export capacities are significantly impaired. The market generally perceives this as a sign that the conflict has fully spilled over from military to energy and sanctions systems.

Analysis indicates that under the dual influence of supply disruptions and policy maneuvers, the global oil market is entering a “wartime pricing” phase—on one hand, production and transportation are limited; on the other, the U.S. is attempting to offset rising oil prices through sanctions relaxation, but geopolitical risks still dominate market expectations.

Iraq Decides to Grant Force Majeure Exemptions, Temporarily Easing Pressure on Foreign Oil Companies

According to CCTV News on Friday, a source from Iraq’s Ministry of Oil stated that the Iraqi government has decided to implement “force majeure” measures for all oil fields developed by foreign oil companies responsible for exploration in Iraq. If unforeseen or unavoidable events occur during the fulfillment of oil development contracts, causing production to halt, the Iraqi government will not hold foreign oil companies liable for breaches related to unfulfilled output or investments under the “force majeure” clause.

This news from Iraq is interpreted as the country, facing war-induced disruptions to energy production, providing a “policy safety net.” Previously, due to deteriorating security conditions and supply chain disruptions, many international energy companies faced compliance pressures.

Meanwhile, oil output in the southern core region of Basra has significantly declined.

According to CCTV, a source from Iraq’s Ministry of Oil said that since the southern ports have ceased oil exports, Basra Oil Company’s daily production has dropped from 3.3 million barrels to 900,000 barrels. Current production has been reduced to about 30% of the pre-conflict level on February 28.

Industry insiders note that Iraq’s move aims to stabilize foreign investment confidence and prevent further withdrawal of international oil companies, which would exacerbate supply contraction.

Iran Responds Firmly to “Sanctions Easing,” Escalating the Game

In response to U.S. claims of “possible easing of sanctions on Iranian oil,” Iran has denied and responded strongly.

According to CCTV News, on the evening of Friday, March 20, Iran’s Oil Ministry spokesperson Saman Ghodusi stated via his personal social media account that currently, Iran has almost no remaining crude oil stranded at sea, nor is there excess oil available to supply to other international markets. U.S. Treasury Secretary Janet Yellen’s recent statements are purely aimed at creating hope for buyers, providing psychological reassurance, and market psychological regulation.

Yellen said on Thursday that the U.S. has allowed Iranian oil to continue being transported through the Gulf region, and the U.S. may lift sanctions on Iranian offshore oil within days.

She also announced that the U.S. has begun lifting sanctions on approximately 130 million barrels of Russian oil that have been shipped or stored at sea, and may take similar measures on about 140 million barrels of Iranian oil.

However, Iran emphasizes that any negotiations must be based on stopping military actions and fully respecting sovereignty, indicating that significant differences remain between the two sides on energy and sanctions issues.

From Military Conflict to Energy Game: Spillover Effects Continue to Expand

From the supply side, this round of conflict has entered a stage of “attacking energy infrastructure.”

Multiple media outlets point out that U.S. and Israeli strikes on Iranian energy facilities, along with Iran’s counterattacks on regional energy targets, have caused damage to key facilities. The Strait of Hormuz, responsible for nearly 20% of global oil and gas transportation, is approaching a standstill.

Meanwhile, attacks by Iran on neighboring countries’ energy infrastructure and retaliatory measures have increased regional supply uncertainties. Some data show that oil exports in the Middle East have fallen by more than half compared to pre-war levels.

Based on reports from domestic and international media, the current U.S.-Israel-Iran conflict has evolved from initial military strikes into a comprehensive game involving energy supply, shipping security, financial markets, and sanctions.

On one side, the U.S. attempts to suppress oil prices and stabilize markets through “limited sanctions easing”; on the other, Iran responds with a tough stance and influences energy supply to counter pressure.

In this context, oil-producing countries like Iraq are forced to adjust policies to cope with the shocks, further illustrating the deep restructuring of the regional energy system caused by the conflict.

As the war enters its fourth week, energy is no longer just an “affected variable” but has become a core tool in the strategic game.

The current core contradiction in the oil market is shifting from a single supply shock to a “supply + policy” dual-variable driver:

• Supply side: declining production, transportation disruptions, infrastructure damage

• Policy side: U.S. considering sanctions exemptions, G7 preparing to release reserves

• Geopolitical side: ongoing escalation of conflict, energy facilities as direct targets

Some institutions point out that this combination will significantly increase oil price volatility and render traditional supply-demand models ineffective, making markets more reliant on geopolitical expectations for pricing.

Additionally, Iran’s suspension of natural gas supplies to some countries and frequent “force majeure” incidents in the region further disrupt the global energy trade structure.

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