Iran war squeezes Iraq’s economy as oil revenues fall and prices rise

What the report says

Iraq’s economy is under increasing strain as the war involving Iran disrupts trade and oil flows, according to Al Jazeera. The report says the country, which relies heavily on oil exports and imported goods, has seen lower oil revenue, higher import costs and a weaker currency since fighting began in late February and shipping through the Strait of Hormuz became more difficult.

Al Jazeera reported that Iraqi Prime Minister Ali al-Zaidi said the country had lost about $60 billion in oil income, after at one point being unable to export roughly 90% of its oil through normal Gulf routes. Because oil revenue makes up more than 90% of Iraq’s federal budget, the disruption has wide budgetary effects. Businesses and consumers are also feeling the impact through longer delivery times, higher fuel and transport costs, and more expensive imported goods.

The story said the Iraqi dinar has weakened on the parallel market, widening the gap with the official exchange rate and adding pressure on households and companies. It also noted concern over dollar availability, including a reduction in physical cash shipments linked to Iraq’s oil-revenue account in the United States. The Central Bank of Iraq said it has enough foreign reserves and blamed the higher parallel-market rate on speculation and regional tensions.

Economists quoted by Al Jazeera said the crisis has exposed long-standing structural weaknesses in Iraq’s economy, especially its dependence on oil and imports. They argued that lasting relief would require deeper reforms, while the government’s immediate response appears limited to short-term measures such as borrowing.