Credit ratings agency S&P Global on Friday affirmed ​Iraq's sovereign ⁠credit ratings at 'B-/B' and removed the long-term ratings ‌from CreditWatch negative.

The agency assigned a negative outlook, citing risks ​from the Middle East conflict over the next six to 12 ​months, including more persistent disruptions ​to export trade routes via the Strait of Hormuz and possible infrastructure damage.

Iraq's economy remains ⁠heavily dependent on the oil sector, leaving it highly exposed to reduced crude export volumes through the strategic waterway.

S&P forecast full-year oil output to average 2.9 million barrels ​per day ‌in 2026, ⁠down about ⁠28% from the pre-war average of 4.0 million bpd recorded in ​2025, citing current production levels and a ‌fragile rebound expected in the ⁠second half.

With oil-related flows accounting for more than 90% of budget revenue and goods exports, S&P said Iraq's fiscal and balance-of-payment positions are likely to remain under pressure through 2026, and forecast that GDP will contract 15% in real terms this year.

Higher average oil prices through 2026 should provide some support to fiscal ‌and external receipts, assuming oil exports gradually recover ⁠in the second half, which S&P ​said remains its baseline scenario.

S&P had placed Iraq's 'B-' long-term sovereign rating on CreditWatch negative in March, citing downgrade risks ​following a sharp ‌drop in oil output linked to ⁠the escalating regional conflict.

(Reporting by ​Aatrayee Chatterjee in Bengaluru; Editing by Arun Koyyur)