GEOPOLITICAL FLUCTUATIONS AND OIL MARKETS: HOW CAN IRAQ PROTECT ITS ECONOMY FROM SHOCKS?, 30 MARCH

 GEOPOLITICAL FLUCTUATIONS AND OIL MARKETS: HOW CAN IRAQ PROTECT ITS ECONOMY FROM SHOCKS?

Amid the geopolitical turmoil sweeping the world, energy markets remain vulnerable to extreme volatility, posing significant challenges for oil-producing countries, including Iraq.

In this context, Mazhar Mohammed Salih, the Prime Minister’s advisor for financial affairs, confirmed that Iraq’s public finances are well-prepared to withstand any disruptions to global oil prices.

Peace Economics: Post-War Is Not Necessarily Stable

Despite global anticipation of an end to the Russian-Ukrainian war, Saleh believes that the post-war period will not mean immediate market stability. Rather, affected countries will enter what is known as “peace economies,” which focus on reconstruction and increased investment to offset losses. This will create a new wave of demand for oil, driving prices higher.

Saleh explained that every 1% increase in global economic growth leads to a 0.5% increase in oil demand, which enhances oil price stability and prevents sharp collapses in the energy market.

Between Washington and Moscow… the oil balance game

While the United States is the world’s largest crude oil producer, it faces major challenges if prices fall below $70 per barrel, due to the high cost of shale oil production. Russia, the second-largest producer, is not in its interest to sell oil at low prices, as it seeks to maintain international consensus within OPEC, especially in the post-Ukrainian war period.

The Iraqi economy: financial hedging and relative stability

Despite global challenges, Salih affirmed that Iraq’s financial situation is stable, with the first quarter of 2025 drawing to a close without any financial disruptions. The country’s fiscal policy is also operating with high discipline, ensuring the provision of salaries, pensions, and social welfare, in addition to the continued implementation of service projects according to the government’s program.

He pointed out that the three-year federal budget, approved under Law No. 13 of 2023, set the price of oil at $70 per barrel, ensuring stable public revenues despite global economic fluctuations.

Finally, is Iraq heading towards financial stability?

While the world experiences severe volatility in oil markets, Iraq’s fiscal policy appears to be moving steadily toward hedging and stability, while ensuring the sustainability of public revenues. As the three-year budget continues, the question remains: Will Iraq remain immune to the coming economic storms, or will geopolitical challenges impose a new reality on global oil markets?