Shafaq News- Baghdad

The oil management in West Asia, particularly in the Arabian Gulf, faces two major shocks due to geopolitical shifts affecting fossil fuel production regions, Iraq’s Prime Minister’s financial adviser, Mudher Mohammed Saleh, told Shafaq News on Monday.

He said the first shock is positive, with global oil prices rising above $100 per barrel, boosting revenues and financial capacity for producing countries. The second shock, however, involves logistical and geopolitical constraints that affect the ability of these countries to market their oil, particularly due to risks linked to exports passing through the Strait of Hormuz.

“The global oil market is experiencing a zero-sum game among producers,” he noted, adding that some countries possess alternative export routes that bypass the Strait of Hormuz, giving them greater flexibility to benefit from higher prices, while others, including Iraq, face greater risks due to their reliance on the strategic waterway.

Read more: Iraq braces for financial meltdown amid Hormuz closing threats

Saleh noted that around 20% of global oil demand could face disruption due to geopolitical tensions among countries along both sides of the Gulf, stressing, “Iraq currently faces challenges related to limited export outlets in the short term.”

He also pointed to continued demand from China, the largest importer of Iraqi crude at roughly one million barrels per day. which helps sustain Iraq’s public revenues and enables the government to meet financial obligations, including servicing public debt. “A return of oil flows to normal levels could halt the recent surge in global prices and potentially trigger a gradual correction as markets move toward a new balance between supply and demand,” Saleh concluded. 

Meanwhile, Iraq’s oil production has dropped sharply from 4.3 million barrels per day to about 1.3 million barrels per day after shipping through the Strait of Hormuz was disrupted.