Global Credit Rating Agency Affirms Iraq's Sovereign Rating, Removes Negative Watch

Standard & Poor's Global Ratings affirmed Iraq's sovereign rating at "B-/B", removing the long-term rating from its negative watch list. However, the agency assigned a negative outlook, citing potential risks from the conflict in the Middle East over the next six to twelve months, including continued disruptions to export trade routes via the Strait of Hormuz and the possibility of damage to vital infrastructure. Iraq's economy remains heavily dependent on the oil sector, making it highly vulnerable to declines in crude exports through the strategic waterway. The agency forecast an average full-year oil production of approximately 2.9 million barrels per day in 2026, a reduction of about 28% from the average recorded prior to disruptions, which stood at 4 million barrels per day in 2025. These projections were attributed to current production levels and a fragile recovery anticipated in the second half of the year. The agency added that, given oil flows constitute over 90% of budget revenues and commodity exports, Iraq's financial conditions and balance of payments are likely to remain under pressure throughout the current year, with a projected real GDP contraction of 15%. Conversely, a rise in average oil prices during 2026 could provide some support for financial and external revenues, assuming a gradual recovery in oil exports in the second half, which remains the agency's baseline scenario. The agency had placed Iraq's long-term sovereign rating at "B-" on the negative watch list last March, pointing to downgrade risks following a sharp drop in oil production linked to escalating regional conflict.