PM advisor warns Hormuz disruptions threaten energy markets, economy

BAGHDAD — Prime Minister’s financial adviser Mazhar Mohammed Salih said Monday that disruptions in the Strait of Hormuz threaten global energy markets and Iraq’s oil-dependent economy, as conflict-related restrictions and a U.S. naval blockade further complicate maritime traffic in the region.

Salih told the state-owned Iraqi News Agency that “the repercussions of closing the Strait of Hormuz depend primarily on the duration of the ongoing conflict in the region, whether it is short-term or extends for years, due to its direct impact on energy markets and the global economy.”

He said a prolonged closure scenario would differ “fundamentally” from short conflicts, adding it would lead to deep effects on global energy markets and reinforce oil’s role as a strategic commodity with political and economic dimensions.

Salih said that a war lasting years could turn the Gulf into “something like a closed sea for global trade,” prompting countries overlooking it, including Iraq, Saudi Arabia and Iran, to reshape trade relations, particularly in oil export outlets and commercial exchange.

He added that the cost of conflict would rise significantly for Gulf states, which would bear direct and indirect economic consequences, requiring a reassessment of economic geography and a search for alternative trade outlets, as well as adapting to scenarios involving partial or temporary reliance away from the Strait of Hormuz.

Salih said Iraq’s options remain relatively limited due to its reliance on land routes through neighboring countries with access to seas, including Turkey, Jordan, Syria, Lebanon and Saudi Arabia.

“Despite the higher cost of alternatives in the short term, necessity requires building an integrated land logistics system linked to regional ports,” he said.

He noted a growing direction to develop both existing and new logistics routes in cooperation with lower-cost neighboring countries to ensure continued Iraqi oil exports and trade movement.

Iraq’s production collapsed from around 4.3 million barrels per day before the Iran conflict to as low as 800,000 to 1.3 million barrels per day as the effective closure of the Strait of Hormuz cut off its main southern export route.

Oil accounts for around 90 percent of government revenue, making the disruption an acute fiscal crisis.

State-owned Basra Oil Company said last week it can restore oil production to more than 2 million barrels per day within hours and reach 3 million barrels per day within days, as the U.S.-Iran ceasefire opens the prospect of resuming shipments through the Strait of Hormuz.

However, U.S. said it imposes a naval blockade on all Iranian ports starting from Monday, a step which further complicates maritime traffic in and around the Strait of Hormuz.