Iraq most exposed to Hormuz closure with no sovereign wealth buffer, economist warns

BAGHDAD — Iraq is the country most vulnerable to the closure of the Strait of Hormuz, lacking the sovereign wealth funds that Gulf states can draw on to sustain spending while oil revenues collapse, prominent economist Mahmoud Dagher warned in a televised interview.

Dagher said Iraq cannot export more than 1 million barrels per day under current conditions, against a normal export level of around 3.5 million — a shortfall of roughly 3 million barrels. With oil accounting for around 90 percent of government revenue, he estimated the resulting revenue gap could reach 70 percent, directly threatening public sector wages.

“We need 8 trillion dinars per month just for salaries,” Dagher said, describing wages as “a red line for everyone, including armed faction members.” He noted that successive governments had expanded public sector hiring in response to political pressure, compounding the monthly burden.

Gulf states, by contrast, can draw on sovereign wealth funds to bridge the gap — a buffer Iraq does not have. The prime minister’s financial adviser said previously that Iraq has a roughly two-month window before Hormuz disruptions hit state finances directly, given the lag between oil shipments and payment, but warned the government may need to borrow if the disruption extends further.

Dagher also warned that if the Strait of Hormuz crisis is not resolved quickly, “other global powers will intervene to protect it,” pointing to the broader economic dimension of the conflict. He described China, Iran and Russia as aligned in an economic axis, with Beijing’s role in industry, energy routes and minerals making it a key actor in the competition with the United States over the waterway’s future.