By: Shatha kalel
Iraq no longer fears war alone. It fears the day salaries themselves could become a national crisis. The conflict surrounding Iran and the Gulf is not only shaking the region militarily, but also threatening the very foundation of Iraq’s economy: oil, the dollar, and government spending.
The real danger does not begin on the battlefield. It begins at the ports. Iraq sells oil in dollars, pays salaries in dinars, and imports most of its food, medicine, and consumer goods from abroad. As a result, any disruption in oil exports quickly turns into pressure on the dollar, rising prices, and growing public anxiety over salaries and living costs.
In 2025, Iraq’s federal budget depended heavily on oil revenues, which accounted for nearly 88% of total state revenues according to Iraqi Ministry of Finance data published in March 2026. This means the government has very limited room to maneuver if oil exports face a major shock.
The problem is not only oil prices, but the ability to export oil itself. By late 2025, Iraq’s exports averaged around 3.4 to 3.45 million barrels per day. However, with tensions escalating in the Strait of Hormuz, these figures have become increasingly vulnerable because Iraq’s southern exports rely almost entirely on Gulf shipping routes.
This is where the greatest threat emerges: salaries.
The Iraqi state does not only fund ministries and institutions. It finances the livelihoods of millions of employees, retirees, and social welfare recipients. Economic estimates indicate that Iraq spends tens of billions of dollars annually on salaries, pensions, and social support programs, making any decline in oil revenues a direct domestic financial crisis rather than merely an energy-sector problem.
If exports decline, fewer dollars enter the Iraqi economy. When dollar inflows decrease, pressure on the Iraqi dinar intensifies. Once the dinar weakens, the prices of food, medicine, and imported goods rise rapidly. At that point, the crisis moves beyond the Ministry of Oil and reaches every Iraqi household.
The most dangerous scenario would be a prolonged regional conflict lasting several months. In such a case, the Iraqi government may be forced to rely heavily on financial reserves, increase borrowing, delay infrastructure projects, or reduce public investment spending. While authorities may prioritize salary payments, protecting salaries alone would not solve the deeper problem if inflation erodes citizens’ purchasing power.
An even more severe scenario would involve a long-term disruption of Gulf shipping routes. Recent reports have highlighted major instability in maritime traffic through the Strait of Hormuz and growing risks to global energy transport. This demonstrates that the crisis is no longer theoretical, but directly tied to the security of global oil markets.
The economic lesson is becoming increasingly clear: Iraq does not simply need higher oil revenues. It needs an economy that is less vulnerable to war and regional instability. A country that depends almost entirely on oil remains exposed to military escalation, shipping disruptions, and geopolitical shocks.
For this reason, the real solution is not merely waiting for the war to end. Iraq must build stronger internal economic resilience through:
diversifying export routes,
revitalizing industry and agriculture,
reducing dependence on imports,
fighting corruption,
and expanding non-oil sources of revenue.
Ultimately, the most dangerous aspect of this war may not be the missiles or military operations themselves, but the growing fear spreading across Iraqi society around one critical question:
If oil exports are disrupted, who will protect Iraqi salaries?
Economic Studies Unit – North America Office
Center for Linkage Studies and Strategic Research