War in Iran and Crisis in the Strait of Hormuz Hit Iraq's Economy

The war targeting Iran and the disruption of trade flow in the Strait of Hormuz dealt a major blow to Iraq's economy, which conducts 90 percent of its exports through this route.

Major Loss in Oil Revenues

Iraqi Prime Minister Ali al-Zeidi stated that the country is facing extraordinary economic difficulties, noting that approximately $60 billion has been lost in oil revenues following the war. Due to disruptions in Gulf routes, the country became unable to export 90 percent of its oil for a period, and these revenues account for more than 90 percent of the federal budget.

Supply Chain and Price Increases

Disruptions in shipping routes affected the supply chain, increasing transit times and costs for businesses and consumers, while also reducing imports. Alaa-Eddin Sulaibi, a supermarket owner in Baghdad, stated that the proportion of imported goods sold in his store dropped from 90 percent before the war to 70 percent, and the prices of these products increased by 25 to 30 percent.

Dinar and Central Bank Reserves

The ongoing crisis put pressure on the Iraqi dinar, which lost value against the US dollar. The dollar, which rose to 1,600 Iraqi dinars on the parallel market last week, fell back to the 1,575 level this week; before the war, this rate was around 1,540.

Structural Weaknesses and Decline in Reserves

Mudher Mohammed Salih, financial adviser to the Prime Minister's Office, stated that the Central Bank's foreign reserves fell from around $106 billion before the war began to approximately $80 billion as of the end of August. Economists state that this crisis highlights the Iraqi economy's excessive dependence on oil and imports.