Two oil tankers were attacked in Iraqi territorial waters early Thursday, killing at least one crew member and forcing Iraq to suspend all operations at its southern oil export terminals. The incident marks a dangerous expansion of the Persian Gulf conflict into the waters of OPEC’s second-largest oil producer, pushing Brent crude back toward $100 per barrel.
The Marshall Islands-flagged Safesea Vishnu and the Malta-flagged Zefyros were struck by what Iraqi authorities described as explosive-laden boats near the Al-Faw port area close to Basra. Iraq’s State Organization for Marketing of Oil (SOMO) confirmed the attacks, and Iraqi Lieutenant General Saad Maan called them “a cowardly act of sabotage.” Rescue teams recovered 38 crew members, all foreign nationals, from the burning vessels while one body was recovered from the water.
Iraq Suspends All Oil Exports From Southern Terminals
The immediate fallout was severe. Iraqi authorities halted operations at all southern oil terminals, which handle the vast majority of the country’s 3.2 million barrels per day in seaborne crude exports. The two tankers were believed to be carrying up to 400,000 barrels of Iraqi fuel oil and condensate combined, and the attacks triggered fuel leaks into surrounding waters.
Iraq produces roughly 4.4 million barrels of oil per day, making it OPEC’s second-largest producer behind Saudi Arabia and the world’s fifth-largest holder of proved crude reserves. Any sustained disruption to Iraqi exports would compound the supply crunch already caused by the broader Strait of Hormuz crisis, where shipping traffic has dropped to under 10% of pre-conflict levels since the U.S.-Israel war with Iran began on February 28.
Oil Prices Surge as Supply Fears Deepen
Brent crude climbed back toward $100 per barrel following the attacks, while U.S. West Texas Intermediate rose above $90. The price spike came despite a coordinated effort by the International Energy Agency to stabilize markets through a record release of 400 million barrels from strategic reserves. Analysts have warned that the reserve release may not be sufficient to offset the scale of the supply disruption.
Since the conflict began, Brent crude has risen roughly 50% from the start of the year, briefly touching $126 per barrel at its peak on March 8. Average U.S. gasoline prices have climbed 17% over the same period, with diesel projected to reach $4.50 to $5.00 per gallon if the disruptions continue, according to CNBC reporting.
What This Means for Business Owners
The escalation into Iraqi waters represents a new threat to global energy supply chains. Fourteen vessels have now been struck in the Persian Gulf in recent weeks, and major shipping companies including Maersk and Hapag-Lloyd have suspended routes through the region entirely. The supply chain effects are expected to hit U.S. businesses within two to five weeks as diverted container shipments arrive in clusters, terminal congestion builds, and trucking demand outpaces available capacity.
For small business owners already dealing with elevated inflation and rising gas prices, the prospect of sustained high energy costs adds another layer of uncertainty. Fertilizer prices have already surged, with New Orleans urea prices jumping from $475 to $680 per metric ton, threatening cost increases across agriculture, food service, and manufacturing. The Federal Reserve meets next week on March 17 to 18, and the oil shock complicates any path toward the interest rate cuts that economists had expected later in 2026.
Iran’s Islamic Revolutionary Guard Corps claimed responsibility for striking commercial vessels in the Strait of Hormuz on Wednesday, saying the ships ignored warnings from its navy. The expansion of attacks into Iraqi waters suggests the conflict’s economic toll on global trade may continue to worsen before any diplomatic resolution takes shape.
