Shafaq News

Iraq's dependence on a single shipping lane for its oil revenue has left it among the countries most exposed to a prolonged regional war, as analysts warn that the confrontation involving Iran is reshaping trade routes, alliances and the balance of global power.

For Iraq, those costs are concrete. Almost 90 percent of its oil exports pass through the Strait of Hormuz, and oil accounts for about 90 percent of government revenue. Shipments slumped after tanker traffic was disrupted when the war began in February. They have since recovered: the oil minister said exports exceeded 3.4 million barrels per day in October, moving through Hormuz, Turkiye's Ceyhan port and tanker trucks via Syria. An analysis reported by Shafaq News on October 25 warned that a renewed closure of the strait could cut Iraq's oil revenues by up to 80 percent, putting salaries, public services, and the dinar at risk.

The Cost Of A Long War

Myles Caggins, a former military spokesperson for the US-led Coalition, said that the war and economic crisis in Southwest Asia affect the entire world. Rising prices for diesel, fertilizer and helium in the United States weigh on the American economy, he said, and the effect extends to Europe and Asia.

Ending the war quickly, Caggins argued, is the best way to limit both economic and human losses. He called on the leaders of the United States, Israel and Iran to work toward a negotiated settlement.

“A deal could include sanctions relief for Iran under agreed terms,” he said, allowing its reintegration into the global economy and easing the hardship facing affected families. He noted, however, that talk of an agreement has recurred for months without a clear outcome, and that ending the war depends on whether the parties are genuinely ready to reach understandings.

Jordanian political analyst Adel al-Ashram described the current period as one of the most dangerous the world has faced, with conflicts running from the war in Ukraine to the Middle East, Sudan and Ethiopia.

“These conflicts are no longer local because the interests of international and regional powers are now entangled in them, carrying their effects into energy, trade and the prices of basic goods,” he said.

The war in Ukraine, followed by the confrontation in the Gulf, pushed up the prices of oil, diesel, gas and food, he said, placing pressure on economies far from any front line.

Al-Ashram warned that parties clinging to their goals and refusing concessions could turn to more dangerous options if they come to believe defeat is near, particularly with major nuclear powers involved. “Without compromise, the risk of escalation rises, and the course of the conflict becomes harder to predict.”

Read more: Can Iraq’s economy weather a wider regional shock? Experts differ

Corridors And Alliances

Turkish political analyst Cevat Gök said that rivalry between global powers is increasingly about reshaping alliances and controlling the sea lanes and logistics routes that link production centers to markets. He pointed to the Strait of Hormuz, the Bab el-Mandeb at the mouth of the Red Sea and the Suez Canal, as well as projects designed to strengthen trade links between East and West.

The world is dividing into multiple blocs, Gök said, including NATO, the BRICS group of emerging economies and the Shanghai Cooperation Organization. “Countries that maintain varied relationships rather than tying themselves to one camp, citing Turkiye, Brazil, India and the Gulf states, have more room to maneuver and may benefit from the shifts under way.”

He expects new agreements and broader regional cooperation as states seek to diversify their partnerships, though the direction of those alignments will depend on how the conflict develops.

That logic applies directly to Iraq. Its Development Road project, a planned 1,200-kilometer rail and highway corridor from the Grand Faw Port in Basra to the Turkish border and on toward Europe, was launched under an April 2024 agreement between Iraq, Turkiye, the United Arab Emirates and Qatar. The first section near the port is already in use, and the transport ministry says the project remains a priority. Baghdad is also building a state tanker fleet: in early October, its state tanker company moved crude beyond Hormuz for the first time in decades, and the oil minister has pressed for faster purchases of supertankers.

Iraq's room to diversify is narrower on its eastern border. On October 21, Baghdad closed the al-Sheeb crossing with Iran until further notice, officially citing technical and logistical shortcomings. The move came amid broader US pressure on Iraq over its economic ties with Tehran, while Iran said Iraqi officials had themselves referred to US pressure behind problems surrounding the crossing.

Who Gains From Attrition

Ahmed Fouad, a Cairo University professor specializing in Zionist thought, said that the current confrontation exceeds the scale of the Cold War but has not reached the level of a declared third world war. Conflicts stretching from Ukraine to West Africa, Libya, the Palestinian territories, Lebanon and Yemen reflect competition between powers that keep backing their allies whenever fighting eases or the balance shifts, he said.

The United States and Russia are carrying growing military and economic burdens, Fouad argued, while China watches without direct involvement. “Continued attrition of its rivals could shift the global balance, much as the United States strengthened its position after entering the Second World War.”

He linked the failure to settle the confrontation with Iran quickly to political consequences that may extend beyond the battlefield, and urged Arab states to coordinate their positions, warning that the warring powers could eventually reach understandings that serve their own interests at the expense of the region's states, resources and strategic corridors.

Mahdi Azizi, an Iranian affairs expert, said the current upheaval follows from the events after the October 7, 2023 attacks: the war in Gaza, the fighting in Lebanon, political change in Syria and the strikes on Iran. In his view, these form part of an effort to redraw the map of the region and of the Arab and Islamic worlds, with effects that reach regional balances and the future of alliances.

Azizi argued that the losses suffered by leaders and factions in the Iran-aligned "Axis of Resistance" do not mean the end of the axis, which he described as an idea not bound to geography or individuals. “Iran's endurance under US and Israeli military pressure pointed to a change in the balance of power, and China's weight in the international system may grow while Iran remained an influential regional actor.”

An Open Question For Baghdad

The analysts' assessments converge on one point: The longer the war continues, the more its costs will be measured in shipping routes, commodity prices, and the alliances states are forced to choose. For Iraq, which earns almost all of its revenue through a single strait and is building a corridor meant to bypass it, the outcome will shape more than its foreign policy.

Read more: Iran’s undersea cable threat raises risks for Iraq

Written and edited by Shafaq News staff.