The reopening of the Strait of Hormuz after the Iran conflict is exposing deep divisions within OPEC, as members seek to restore oil production following months of disrupted exports, testing the producer group’s ability to balance national revenue needs with its longstanding strategy of managing global crude supplies.
The war temporarily disrupted exports for several Gulf producers after Iran closed the Strait of Hormuz and the United States imposed a blockade, cutting off a route that carries about a fifth of the world’s oil. While crude prices rose during the conflict, producers including Iraq, Iran and Kuwait were unable to fully benefit because much of their oil could not reach international markets.
With shipping through the strategic waterway gradually resuming, countries whose production suffered the steepest declines are pressing for higher output quotas to recover lost revenues, reviving long-running disputes over OPEC production limits.
Iraq has emerged at the center of the debate. The country’s crude production fell by about 75% during the conflict to just over 1 million barrels a day in April and May, down from more than 4.5 million barrels a day at the start of the year. Baghdad is seeking permission to raise production to a record 5 million barrels a day as exports normalize, with a longer-term ambition of reaching 7 million barrels a day.
Iraq’s oil minister told Bloomberg the country would have to decide whether to remain in OPEC if production targets are not significantly increased.
“What’s the motivation? They need the cash!” said Jay Hatfield, chief executive officer and founder of Infrastructure Capital Advisors.
The pressure comes even as OPEC+ has already agreed to continue easing production restraints. Seven producers, Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman, agreed to implement a combined production adjustment of 188,000 barrels a day beginning in August 2026, reflecting efforts to gradually restore supply while maintaining stability in the oil market.
The latest adjustment may ease some pressure on producers, but it is unlikely to satisfy countries seeking substantially larger quota increases after suffering steep production losses during the conflict.
Saudi Arabia enters the negotiations from a stronger position than many of its Gulf neighbours. Unlike Iraq and Kuwait, the kingdom was able to continue exporting a significant portion of its crude by diverting shipments through pipelines to the Red Sea port of Yanbu, bypassing the Strait of Hormuz. Saudi oil production declined by less than 40% during the conflict, compared with much steeper reductions elsewhere in the Gulf.
That leaves Riyadh facing a familiar dilemma.
Allowing members to sharply increase production would help countries recover lost export revenues but could flood the market with additional crude and depress prices. Maintaining tighter quotas, however, risks deepening dissatisfaction among producers that argue they should be allowed to recoup months of lost sales.
The dispute revives one of OPEC’s oldest fault lines: the tension between maximizing collective oil revenues through supply discipline and meeting individual members’ fiscal needs. The challenge has become more acute as many producing countries rely heavily on oil income to finance government spending and economic recovery.
The latest tensions also follow the departure of the United Arab Emirates from OPEC after disagreements over production policy, underscoring the growing difficulty of maintaining consensus within the nearly 70-year-old producer group.
For Saudi Arabia, OPEC’s largest producer and de facto leader, the coming quota negotiations could determine whether the alliance emerges from the Iran conflict united behind a managed supply strategy or faces renewed strains as members prioritize national interests over collective market management.
