S&P Global has placed Iraq's long-term sovereign credit rating on CreditWatch negative due to a sharp drop in oil output due to escalating conflict in the Middle East. The country's oil production dropped from 4.2 million bpd to 1.3 million barrels per day due to the closure of the Strait of Hormuz. The agency expects the government to draw down on its international reserves to meet external debt obligations. Despite this, S&P warns that prolonged disruption of oil production could strain Iraq's fiscal and external positions through 2026.