The Strait of Hormuz is one of the world’s most strategically important maritime passages, not only because of its geographical location but also because of its pivotal role in global oil and natural gas trade. Connecting the Arabian Gulf with the Gulf of Oman and the Arabian Sea, the Strait serves as a major export route for several of the world’s leading energy-producing countries. According to the U.S. Energy Information Administration (EIA), oil flows through the Strait reached approximately 20.9 million barrels per day during the first half of 2025, equivalent to nearly 20% of global petroleum liquids consumption and roughly one-quarter of global seaborne oil trade. This strategic importance is particularly significant for Iraq because of the close relationship between its economy and the oil sector. A substantial share of Iraq’s oil exports is shipped through its southern terminals in the Arabian Gulf and is therefore highly dependent on the security and continuity of maritime navigation through the Strait of Hormuz. Consequently, political and security tensions surrounding the Strait are not merely distant geopolitical developments for Iraq; rather, they may translate directly into economic, fiscal, and trade-related risks. First: The Strait of Hormuz in the Geopolitical Conflict Equation The geopolitical importance of the Strait stems from its position at the intersection of regional and international interests. It involves the interests of energy-producing and energy-consuming countries, alongside the security and military interests of regional and global powers. As a result, escalating political disputes or military confrontations in the region can rapidly affect shipping movements, oil markets, insurance premiums, and maritime transportation costs. A complete closure of the Strait is not necessary for significant economic consequences to emerge. Even an increased probability of attacks on vessels or disruptions to maritime navigation may prompt shipping and insurance companies to reassess risks, raise premiums, or reduce operations. Developments in 2026 demonstrated the sensitivity of maritime transportation to such risks, as vessel traffic declined considerably compared with pre-escalation levels. Accordingly, the Strait of Hormuz has evolved from being merely a maritime passage into an important component of global energy security, as any significant disruption can simultaneously affect energy supplies, prices, and uncertainty in international markets. Second: Iraq and the Risks of Dependence on the Southern Export Route The vulnerability of the Iraqi economy becomes more apparent when examining the structure of its oil exports. According to the U.S. Energy Information Administration, Iraq’s seaborne crude oil exports averaged more than 3.2 million barrels per day in 2024, with maritime crude exports shipped from southern terminals located in the Arabian Gulf. Asian markets accounted for approximately 72% of Iraq’s crude oil exports, particularly China, India, and South Korea. This indicates that the security of maritime routes is inseparable from Iraq’s economic security. The greater a country’s dependence on a single major export route, the greater its exposure to political and security shocks affecting that route. Developments in 2026 provided a practical illustration of this vulnerability. Iraqi oil exports declined during periods of maritime disruption and subsequently increased to approximately 2.34 million barrels per day in August 2026 following a relative improvement in shipping and transit conditions. Nevertheless, exports remained below pre-escalation levels, which had exceeded 3.3 million barrels per day. Third: Implications of Geopolitical Tensions for the Iraqi Economy The first and most immediate impact concerns oil revenues. The Iraqi economy remains highly dependent on the oil sector for financing public expenditure. International Monetary Fund estimates indicate that oil revenues are expected to continue accounting for more than 90% of government revenues over the medium term. Consequently, a reduction in the volume of exported oil due to maritime disruptions could reduce government revenues even when global oil prices increase. This creates an important paradox: geopolitical tensions surrounding the Strait of Hormuz may push global oil prices upward, which could theoretically benefit oil-exporting countries. However, Iraq may be unable to fully benefit from higher prices if it cannot export the planned quantities of crude oil or if the cost of transporting oil to international markets rises substantially. A second impact involves higher maritime transportation and insurance costs. In September 2026, the cost of transporting Iraqi oil increased significantly amid regional tensions and disruptions to maritime navigation. Although there were differing assessments regarding the immediate causes of these increases, security risks and disruptions to shipping remained important factors affecting transportation costs. The third impact concerns the public budget. Any sustained decline in net oil revenues directly affects the government’s ability to finance both current and investment expenditures. Iraq is already highly sensitive to oil-price fluctuations. The International Monetary Fund indicated that Iraq’s fiscal breakeven oil price increased to approximately USD 84 per barrel in 2024, compared with around USD 54 per barrel in 2020. The fourth impact relates to foreign trade and domestic prices. Maritime disruptions are not limited to oil exports; they may also affect imports, shipping costs, insurance premiums, and global supply chains. In an economy that relies considerably on imports to satisfy domestic demand, increases in external transportation and insurance costs may gradually be transmitted to domestic consumer prices. Fourth: Energy Security as an Integral Component of Iraq’s Economic Security The Strait of Hormuz crisis demonstrates that the concept of energy security in Iraq should not be limited to possessing large oil reserves or increasing production capacity. It should also encompass the ability to deliver oil to international markets through secure, reliable, and diversified export routes. Possessing substantial oil reserves and production capacity cannot guarantee economic security if export channels remain vulnerable to geopolitical shocks beyond Iraq’s direct control. This highlights the importance of diversifying oil export routes and reducing excessive dependence on a single geographical corridor. The disruptions of 2026 encouraged Iraq to explore the expansion of northern export alternatives. In September 2026, trial operations began to transport crude oil from southern fields toward Kirkuk in an effort to support exports through Türkiye’s Ceyhan port. However, the available logistical capacity remains limited compared with the volume normally exported through Iraq’s southern terminals. Fifth: Strategic Options for Iraq to Mitigate Geopolitical Risks Addressing these challenges requires a long-term strategic approach based on several complementary measures. A primary priority is the diversification of oil export routes, thereby reducing excessive dependence on the southern maritime corridor and developing alternative pipeline routes where they are economically and politically feasible. Iraq should also strengthen its strategic oil storage capacity and continue developing its ports, internal pipelines, and supporting infrastructure. Such measures would provide greater flexibility in managing temporary disruptions to exports. From an economic perspective, there is also a pressing need to accelerate the diversification of government revenue sources. The fundamental challenge is not limited to the Strait of Hormuz itself. Rather, the deeper structural vulnerability lies in the fact that any major shock affecting the oil sector can rapidly be transmitted to the public budget, government expenditure, and overall economic activity because of Iraq’s high dependence on oil revenues. Accordingly, expanding non-oil revenues, strengthening the private sector, promoting domestic production, and broadening the economic base are essential elements in reducing Iraq’s exposure to external geopolitical shocks. Conclusion Geopolitical tensions in the Strait of Hormuz offer Iraq an important lesson that extends beyond the immediate security crisis: the need to reconsider the concepts of economic security and energy security as components of an integrated system encompassing production, exports, transportation, storage, revenue diversification, and access to international markets. Iraq possesses a substantial oil resource base. However, its high dependence on oil revenues and the concentration of a large proportion of its crude oil exports through the southern maritime corridor make the economy particularly sensitive to geopolitical shocks in the Gulf region. Sustainable economic security therefore requires a gradual transition from responding to crises after they occur toward establishing a proactive system of risk management. This objective can be advanced through diversifying oil export routes, developing transportation and storage infrastructure, strengthening alternative export channels, creating adequate fiscal buffers to absorb external shocks, increasing non-oil revenues, and diversifying the domestic productive base. Through these measures, Iraq can reduce the transmission of external geopolitical crises into its public finances and domestic economy, strengthen the resilience of its energy sector, and enhance its capacity to safeguard national resources and maintain economic stability in an increasingly uncertain regional and global environment.