How Iraq's Economy Can Be Affected by the Israel-Iran Conflict

The ongoing conflict between Israel and Iran could have profound ripple effects on Iraq, particularly in terms of oil prices and economic stability. If tensions escalate into direct military confrontation, the entire Middle East could see disruptions in oil production and exports. Iran might attempt to close or threaten the Strait of Hormuz, a crucial chokepoint through which about 20% of the world’s oil passes. Such a move would instantly raise global oil prices.

For Iraq, this volatility can be both a blessing and a curse. Higher oil prices would mean increased revenue for the Iraqi government, which relies on oil exports for over 90% of its income. However, prolonged regional instability could also threaten Iraq’s own oil infrastructure, delay foreign investment, and raise security risks for international companies operating in the country. Additionally, any perception that Iraq is siding with one party over the other could draw the country into the geopolitical crossfire, complicating its already fragile recovery and development efforts.

In short, the Israel-Iran conflict could lead to oil price surges that temporarily boost Iraq’s revenues, but it may also increase regional insecurity, hesitation in investment, and operational risks in Iraq’s vital oil sector.