Iraq says oil revenue losses and trade disruption deepen economic strain after Iran war spillover

Iraq says the war involving Iran has triggered a sharp economic shock, cutting oil revenues and disrupting trade routes that pass through the Strait of Hormuz. The government says the impact has been felt in exports, imports and transport costs, adding pressure to an economy that depends heavily on oil income. Prime Minister Ali al-Zaidi has described the country as facing extraordinary economic challenges.

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According to the supplied report, Iraq says it has lost about $60bn in oil revenues since the conflict began. Officials say that, for a period, the country was unable to export about 90% of its oil through its usual Gulf routes. The disruption has also raised the cost of shipping, lengthened delivery times and reduced the flow of imported goods into the country.

The strain is significant because oil revenues account for more than 90% of Iraq's federal budget. That leaves the state highly exposed when exports are interrupted, even briefly, and makes any fall in oil income a direct threat to public finances. The report also says the disruption has affected businesses and consumers, with higher transport and fuel costs feeding into prices.

The Strait of Hormuz is central to the movement of oil and other trade from the Gulf, and any interruption there can quickly affect regional economies. In Iraq's case, the problem is not only the loss of export earnings but also the higher cost of bringing in food, medicines, appliances and industrial raw materials. That combination can weaken the dinar, squeeze household budgets and complicate government spending plans.

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The report says Iraq has long relied on imports for many basic goods, while oil exports have traditionally offset those purchases and helped maintain a trade surplus. Since the start of the war in late February, that balance has shifted. The end of the free flow of trade through the strait has made Iraq's dependence on external shipping routes more visible and more costly.

Merchants in Baghdad say the effects are already being felt in shops. One supermarket owner said the share of imported goods sold in his store had fallen to 70% from 90% before the war, as local products replaced some imports. He also said imported goods had become 25% to 30% more expensive, while some shipments from China were taking up to three months to arrive because of higher transport costs and longer routes.

The report also links the disruption to wider regional negotiations, saying the Gulf routes have become central to talks between Washington and Tehran. It says Iran has tied free passage through the strait to easing US pressure and lifting a blockade on Iranian ports. That makes Iraq's economic exposure part of a broader geopolitical dispute, not just a domestic budget problem.

What remains unclear is how long the disruption will last and whether Iraq can restore normal export and import flows quickly enough to limit further losses. The scale of the revenue hit, the effect on prices and the impact on government finances will be closely watched in the coming weeks. For now, the country appears to be facing a prolonged period of higher costs and reduced trade capacity.

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