Iraq's Dinar Faces Collapse if Conflict Expands

Economist warns: The dollar will explode if Iraq enters the war with Israel and Iran - Urgent

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economic hell

As regional tensions between Israel and Iran escalate, Iraq stands at a dangerous juncture, the repercussions of which could extend beyond politics and security to the heart of the fragile economy, burdening ordinary citizens who still yearn for a lost stability. Whenever the drums of war beat in the region, Iraqi markets are the first to tremble, as fear turns into a frenzied race for the dollar, and the dinar becomes a burden rather than a security.

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In a scene that is repeated with every crisis, anxiety levels rise among traders and citizens, and the dollar begins to rise, as if reflecting the pulse of fear in the streets. As news of the potential for the conflict to expand continues, economists warn of an impending catastrophe, warning that any Iraqi involvement in the conflict will mercilessly ignite the foreign exchange market and push the prices of basic commodities to levels beyond the reach of ordinary citizens.

From this standpoint, the warning issued by economic expert Othman Karim, on Sunday (June 15, 2025), reflects a worrying reality, speaking clearly about the scenarios that could destabilize the dinar and threaten food security, if Iraq becomes embroiled in a war that is not its own, but one that will cost it dearly.

Karim told Baghdad Today, "The rise in the dollar exchange rate immediately after the Israeli strikes is a normal occurrence in the market, due to the fears of traders and those who own dinars and who resorted to quickly converting their currency into dollars."

He added, "The exchange rate will remain below 150,000 dinars for the time being, but if Iraq enters a state of war, prices will reach more than 160,000 dinars, and may rise further, significantly impacting food prices, especially if the seaports on which Iraq relies are completely closed."

The Middle East is witnessing an unprecedented escalation in tensions between Israel and Iran, amid an exchange of threats and military strikes that threaten to expand the conflict to neighboring countries.

Iraq, due to its geographical location and its intertwined relationships with the parties to the conflict, faces the possibility of slipping into a war, either directly or indirectly, raising widespread popular and economic concerns.

Iraq is a country that relies heavily on imports, particularly food, which arrive via seaports. This makes it vulnerable to fluctuations in regional and international markets.

The Iraqi economy also suffers from structural fragility, making it highly susceptible to political or security unrest. This was evident in previous crises that led to sharp fluctuations in the dinar's exchange rate against the dollar, directly impacting the prices of goods and services.

With recurring geopolitical tensions, Iraqi markets are in a state of constant suspense, with the dollar exchange rate being more influenced by sentiment and anxiety than economic data. This makes any military escalation in the region a direct cause of significant fluctuations that could impact citizens' daily lives.

Al-Maliki talks about Iraq's role in the battle against Iran: Don't be so dry that you'll break.

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Celebrating Eid al-Ghadir

The leader of the State of Law Coalition, Nouri al-Maliki, said that it is necessary to stand with Iran and support it in its confrontation with the Zionist aggression. He spoke about Iraq’s role in these circumstances, and cited the famous words of Imam Ali, “Do not be dry or you will break,” to the end of the will in Nahj al-Balagha, directed to the companion Malik al-Ashtar, from whom the leader of the State of Law Coalition, the Bani Malik tribe, descends.

Al-Maliki during a celebration held by the Al-Bashaer Movement on the occasion of Eid al-Ghadir in the capital, Baghdad:

Imam Ali ibn Abi Talib left a will for us, not just for Malik al-Ashtar, which is: “Do not be so tender that you will be squeezed, nor so dry that you will be broken.” This is the political style that should characterize those who manage the public affairs of the nation: neither be so tender, soft, and moist that those who are hostile to Islam will press them down and surrender, nor be so dry that without any management process that they will be broken and the nation will be broken by them.

Today, those who stand against the illegitimate Zionist entity are the sons and followers of Ali. We do not belittle our Muslim brothers who stood with us, but today's battle is a battle between the line of Ali and the line of Zionism.

Today, the sons of Ali achieved a great victory in making the world aware that what is said about the invincibility of the Israeli army is not true. They defeated the Israeli army, and these images that we are seeing from inside Tel Aviv are a great victory achieved by the Islamic Republic with the courage of the Commander of the Faithful.

The Islamic nation must stand with Iran against Zionism.

In Iraq, it is true that the battle is not on our borders, but the entire Islamic nation must stand with Iran, support it, and back it. War is not a picnic, and international institutions must stand with what is right.

Zionist behavior poses a threat not only to Iran and Iraq, but also to the Islamic nation and the entire world.

The aggression against the Islamic Republic of Iran is nothing but an attempt to subjugate this nation and this country to the dictates of the Zionists and the arrogant powers, after all previous methods to undermine its standing and its resistance approach had failed.

We see standing with the Islamic Republic and showing solidarity with it by all available means as a religious, moral, and humanitarian duty. We hope that this aggression will soon end and that the enemies will be defeated.

The Federal Court issues a decision that pleases Kurdistan employees.

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The Federal Supreme Court in Iraq is expected to hold a session to rule on a case filed by a number of Kurdistan Region employees regarding salaries that the federal government has stopped sending to the region's employees.

"The Federal Supreme Court is expected to hold a session to consider the lawsuit filed against the federal government's decision to suspend the payment of employee salaries," Patriotic Union of Kurdistan (PUK) MP Sarwa Mohammed told the PUK's official website.

She added, "If all members of the Federal Court return to Iraq after performing the Hajj pilgrimage, the Federal Court will hold a special session to consider this case tomorrow, Monday. Otherwise, the session will be postponed, but in any case, it will be held this week, God willing."

She explained, "God willing, the Federal Supreme Court will issue a decision that serves the interests of employees in the Kurdistan Region, and we are working hard to support the employees' demands."

She said, "We believe in the necessity of addressing outstanding issues through dialogue and understanding, and we do not support the language of threats and escalation. The language of dialogue is the best way to resolve outstanding issues between the federal government and the Kurdistan Regional Government."

She pointed out that, "according to the information available to us, the Federal Court is expected to issue a decision that will please employees in the Kurdistan Region, as it previously issued a decision not to link employee salaries to any political or technical disputes."

Prime Minister's Advisor: Iraq is qualified to become a regional financial center with four strategic powers.

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The Prime Minister's financial advisor, Mazhar Mohammed Salih, identified four factors that make Iraq a regional financial center on Sunday, stressing that Iraq possesses foreign reserves exceeding $100 billion.

“There are four elements of strength that make Iraq a regional financial center, the first of which is that it is the second largest producer of crude oil in the Middle East, and it has the fourth largest oil reserves in the world, through which it competes to take precedence in the global energy market, through more production and achieving financial flows that make it a financial and economic pillar in the economic geography of the Middle East, by achieving large financial surpluses that can be directed to investment in financial infrastructure,” Saleh told the Iraqi News Agency (INA).

He stated that "Iraq has foreign reserves exceeding $100 billion, which provides it with a significant financial safety margin, confidence in monetary stability, and high financial investment attractiveness."

He added, "The second factor is Iraq's unique geoeconomic location, which is a vital corridor linking the world's north to its south. This represents an open economic space between global markets and their financial and commercial attractions, with links that provide important climates for the concentration of regional financial markets, which will revolve around the strategy of the 'development project' linking Europe and the Gulf."

He continued: "The third factor is the demographic or human factor, and its foundation is the population boom, as the percentage of the population under the age of thirty is close, which makes Iraq one of the young nations. The high percentage of youth (more than 60% under the age of thirty) will provide a flexible human base that can be trained in financial technology, banking innovation, digital technology, and artificial intelligence." He noted that "the government is undertaking the establishment of an important college for artificial intelligence sciences as inputs to the financial labor market and its foundations."

He added, "The fourth factor is modernizing and restructuring governance in government-owned banks, given that they currently control 80% or more of banking activity." He emphasized that "the reform campaign being led by the government today for the aforementioned banks aims to transform Iraq into a global financial center after ridding it of the risks of bureaucracy and inefficiency inherited over many decades."

He pointed out "the importance of electronic payments and the gradual expansion of the use of bank cards, point-of-sale (POS), collection systems, and smart wallets, which have helped achieve significant leaps in digital financial inclusion. This is coupled with the presence of the Iraq Stock Exchange and the Securities Commission, which operate in a robust, integrated, and promising manner as an infrastructure to establish Iraq as a regional hub for consolidating the country's institutional financial stability."

He explained that "the legal, executive, and regulatory infrastructure requirements are the key lever for enabling this transformation. These include, for example, linking banks to effective electronic payment platforms and supporting the development of the current National Data Center to serve as the sovereign digital financial infrastructure that supports Iraq's efforts to transform into a regional financial center."

He pointed out that "Iraq's transformation into a regional financial center will be achieved through the collection and integration of financial, banking, and economic data, supporting smart monetary and financial policies, enabling financial technology and smart data analysis, enhancing transparency and governance of financial institutions, stimulating the non-banking finance sector, such as microfinance companies, reforming the insurance sector, and licensing financial technology ( Fintech ) companies."

He pointed out that "the current political, legal, and institutional stability that our country enjoys today, in a prosperous and solid manner, is the true basis for financial strength. There is no financial center without a stable and secure political and legal environment."

Saleh emphasized the importance of building regional and international partnerships, such as studying the importance of joining regional payment systems and financial structures of international groups such as the G20 or BRICS, or partnerships with strong financial centers in Singapore, Dubai, Hong Kong, and others.

International Chamber of Commerce: Investment companies' activity expands amidst the security situation in Iraq.

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The International Chamber of Commerce confirmed on Sunday that investment companies' activity is expanding amidst the security situation in Iraq, while stating that large foreign companies' investments require Iraqi operating companies and staff.

"Iraq is a fertile country for investment, especially with the recent remarkable and successful steps taken by the government to overcome many administrative and legal issues to advance the private sector," Mohsen Al-Hamidawi, head of the International Chamber of Commerce in Iraq, told the Iraqi News Agency (INA).

He added, "The arbitration process between companies will help many companies invest in Iraq because their rights are now guaranteed from a legal and administrative standpoint, and the International Chamber of Commerce will continuously monitor all contracts concluded with companies."

He pointed out that "Iraq lost a lot years ago due to the lack of arbitration. Any problem that arose between companies and the Iraqi government would be referred to Abu Dhabi or France. Now, arbitration is available through the International Chamber of Commerce in Iraq. We have important conditions to protect these companies from procrastination and to secure their rights. Companies are now safer at work and more active in light of the security that Iraq enjoys."

He explained, "During the past two years of the government's tenure, more than 150 companies have signed contracts for oil, gas, and other projects, particularly the Development Road Project. More than a year ago, we officially announced to all companies worldwide, through the International Chamber of Commerce in Paris, the launch of the International Chamber of Commerce in Iraq. This has encouraged companies to enter and invest."

He explained that "large foreign companies that undertake major projects will inevitably need Iraqi companies and to employ Iraqi workers. This will encourage more small and large Iraqi companies to invest with foreign companies and take on what are called 'subcontractors' or major contracts. Iraqi companies, whether large or small, are not deficient and will deal with this event well."

The Coordination Framework mobilizes demonstrations in support of Iran: Iraq must be part of the solution.

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Meeting in Al-Abadi's office

 

On Sunday, the Coordination Framework called on the Iraqi people, across all social, political, and cultural lines, to demonstrate in protest against the "aggression and in support of the Islamic Republic's steadfastness in confronting it." While expressing its categorical rejection of the violation of Iraqi airspace, the Framework emphasized the need for Iraq to continue its role as part of the solution and prevent the repercussions of the crisis from continuing.

 

The framework stated in a statement:

The Coordination Framework held its regular meeting at Dr. Haider al-Abadi's office, attended by Prime Minister Mohammed Shia al-Sudani and leaders of the framework.

The participants discussed developments in the region, and the leaders of the framework expressed their condemnation and denunciation of the continued aggressive behavior of this entity and its attacks on the Islamic Republic, which have resulted in the martyrdom of several leaders and scholars, dozens of martyrs, and hundreds of wounded civilians, as well as the targeting of infrastructure and economic and strategic sites, all of which portend an expansion and continuation of the war.

The participants called on the international community in general, and the countries of the region in particular, to stand up against the arrogance of this entity and force it to halt its aggression against the Islamic Republic. The framework also called on our proud people, from all walks of life, socially, politically, and culturally, to take to the streets in demonstrations denouncing the aggression and supporting the steadfastness and resilience of the Islamic Republic in confronting it.

 

Araqchi: We will prepare the ground for a return to diplomacy and negotiations, but with one condition.

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Iranian Foreign Minister Abbas Araqchi stressed that the Islamic Republic has not abandoned diplomacy, noting that the cessation of Zionist attacks will open the way for the resumption of diplomatic dialogue.
Speaking to Iran Press, Araghchi pointed out that the Zionist attacks came at a time when Iran was seeking diplomatic progress.

He stressed that Iran is committed to its principles of resolving disputes through peaceful means.

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Details of the phone call between Al-Sudani and the Iranian President

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Iranian President Masoud Pezeshkian called on Iraq on Sunday to be more cautious regarding its borders and airspace.

Pezeshkian said during a phone call with Iraqi Prime Minister Mohammed Shia al-Sudani, according to Iranian media, that "if the Zionist aggression against Iran continues, the Iranian response will be more severe and decisive." He

added, "Violating Iraqi airspace to attack Iran is clear evidence of the Zionist entity's criminality and its violation of international norms," indicating that "Iraq must be more cautious regarding its borders and airspace."

He continued, "Iran did not start the war, but we responded firmly, and if the aggression continues, our reactions will be more painful and harsh.

" Al-Sudani's media office also issued a statement a short while ago, stating that "Al-Sudani had a phone call with the President of the Islamic Republic of Iran, Masoud Pezeshkian, and expressed Iraq's solidarity, government and people, with Iran, which is being subjected to blatant Zionist aggression, stressing its concern for its security and stability, as they are linked to the security and stability of the region."

Al-Sudani also stressed "Iraq's keenness to prevent the war from expanding," pointing to "the Iraqi government-led efforts on various fronts to prevent the Zionist entity from violating Iraqi airspace."

According to the statement, Al-Sudani expressed "Iraq's readiness to provide all necessary assistance to address the effects of the aggression against the Islamic Republic of Iran, within the framework of solidarity that unites Islamic countries."

For his part, Pezeshkian thanked Iraq, according to the statement, for "its various official and popular activities, and for its declared and clear positions in rejecting the behavior of the Zionist entity and its repeated attacks on countries in the region, in addition to its crimes against the Palestinian people." He stressed "the importance of Islamic countries taking a unified position regarding these attacks and blatant violations of international law, which may extend to other Islamic countries."

660 people arrested for manipulating food prices and dollar exchange rates.

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The Ministry of Interior announced on Sunday the arrest of 660 individuals for manipulating food prices and dollar exchange rates.

The head of the Ministry of Interior's Public Relations and Media Department, Brigadier General Muqdad Miri, said in a statement received by Al-Mada: "The Ministry of Interior has launched a major campaign to track down those manipulating food prices and those promoting a rise in the dollar exchange rate against the Iraqi dinar in an attempt to exploit the circumstances the region is experiencing."

He pointed out that "the Anti-Organized Crime Squads were able to arrest 660 people accused of price manipulation."

 

Parliamentary Finance: The government is determined to prepare the financial budget schedules.

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The Parliamentary Finance Committee confirmed on Thursday that the government is working on preparing budget schedules that are in line with the country's financial reality.

Committee member Atwan Al-Atwani said in a statement followed by Lakma News that "the committee discussed with the Prime Minister the preparation of the budget, and stressed the need for it to arrive before the end of the year to give legal status to government spending, both operational and investment."

He added, "The government is determined to prepare budget schedules in line with the current financial reality, given the increase in operating spending and the need for investment spending to finance projects. We look forward to the budget being presented to the House of Representatives in the coming days."

Al-Atwani pointed out that "the government is keen to secure salaries despite the annual financial deficit," noting that "the government is taking serious steps to provide alternatives to financing the budget other than oil to ensure additional resources."

 

It was thought to be an earthquake. Initial images of the bombing of the vicinity of the Fordow nuclear facility in Qom, Iran.

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In a clear video , an explosion was heard over the vicinity of the Fordow nuclear facility, located southeast of Qom, on Monday (June 16, 2025), as part of a new wave of escalation in the escalating regional war between Iran and Israel.

Smoke and light emission are visible in an area adjacent to the facility, likely at the time of the bombing, indicating a precise airstrike.
Circulating comments confirm that only areas above the surface were targeted, as the facility is fortified beneath a mountain, approximately 500 meters deep, and would not be easily affected by conventional bombing.
There are no reports yet of significant damage within the fortified nuclear facility, nor any reports of any radioactive leak or human harm.

Earlier today, a 2.5-magnitude earthquake was recorded in the Iranian city of Qom, located approximately 35 kilometers from Iran's Fordow nuclear facility.

Ansar Allah: Our operation was coordinated with the attacks carried out by Iran against the Israeli enemy.

Issued by the Yemeni Armed Forces In the name of God

0:04

The Most Gracious, the Most Merciful. God Almighty said, "And God will surely support whomever He supports.

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He supports. Indeed, God is Powerful and Exalted in Might." God Almighty's truth.

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In victory for the oppression of the Palestinian

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and Iranian peoples, and in response to the crime of starvation

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and thirst

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committed by the Zionist enemy against our brothers.

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In the Gaza Strip, the missile force carried out a military operation.

0:30

The Yemeni Armed Forces carried out a missile operation.

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targeted sensitive targets of the Israeli enemy in the occupied Jaffa area.

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with a number of hypersonic ballistic missiles.

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Palestine II type.

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at various times over the past 24 hours.

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This operation was coordinated with the operations carried out.

0:55 The Iranian Army

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and the Revolutionary Guards

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are carrying out operations against the criminal Israeli enemy.

1:03

The operations have successfully achieved their goals, thanks to God.

1:07

The Yemeni Armed Forces, the Islamic Republic of Iran

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people, army, and leadership, are

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bravely confronting, with willpower, determination, and faith

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the brutal Zionist aggression and are relying on God to

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deliver blow after blow to its facilities

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and its headquarters and bases. The Yemeni Armed Forces

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are proudly following these

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developments, confirming that they are committed to the covenant and promise with

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the people of Gaza and its loyal, free mujahideen until

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the aggression against them stops and the siege is lifted.

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To the rest of the Arab

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and Islamic countries and peoples, we say nothing but Jihad is a door to...

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The gates of Paradise are open, God has opened them for His special friends.

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So hurry so that the Israeli crimes do not stop...

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Your brothers in Gaza, for what befalls them today will come to an end.

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With you tomorrow, God is sufficient for us, and He is the best Disposer of affairs.

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The Master and the best Supporter. Long live Yemen, free and honorable.

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Independent, and victory to Yemen and to all the free people of the nation.

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Sana'a, Dhu al-Hijjah 146 AH

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Corresponding to June 15, 2025. Issued by

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Yemeni Armed Forces

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Parliamentary Finance: The 2025 Budget will see a deficit in investment aspects

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Parliamentary Finance Committee: The 2025 budget will see a deficit in investment aspects.

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Member of the Parliamentary Finance Committee, MP Moeen Al-Kadhimi, confirmed that "reports of a crisis or delay in the disbursement of state employees' salaries are inaccurate. Salaries are fully secured and will be disbursed smoothly, as has been the case in recent months."

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Al-Kadhimi said in a press statement seen by Al-Masry Al-Youm on Saturday that "the 2025 budget will witness a deficit in investment aspects and some operating expenses due to the decline in oil revenues, but this will not affect salaries."

In this context, he explained that "the current year's budget schedules will be put to a vote at the beginning of the final legislative session, which will allow the government to proceed with implementing the delayed budget items."

Mazhar Saleh: The government's hypermarket strategy has enhanced market stability and reduced inflation.

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The Prime Minister's financial advisor, Mazhar Mohammed Saleh, confirmed today, Saturday, that the government's trade policy, after adopting the semi-cooperative markets (hypermarkets) strategy, has represented an important development in the price defense policy against financing trade from the parallel exchange market currency, and has created sustainable and stable competitiveness in the pricing system.

Saleh explained in an interview with Al Furat News Agency, "This effective trade policy has led to the regularity and stability of the national market, particularly in the stability of the consumer price index, which is one of the pillars of measuring inflation in the country." 

He pointed out that "the country is experiencing a significant decline in its annual inflation rate, coinciding with the approaching completion of the first half of this prosperous year." 

Iranian-Israeli escalation threatens Iraq's electricity supply... and an expert warns of a "dark scenario."

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Economic expert Nabil Al-Marsoumi warned of disastrous military and economic repercussions for Iraq as a result of the mutual escalation between Iran and Israel, especially after the targeting of the Pars gas field, which Iran shares with Qatar.

This field is one of the largest gas fields  in Iran and supplies Iraq and Turkey. In statements monitored by Al-Matala, Al-Marsoumi considered the inclusion of strategic facilities in the Israeli Air Force's target bank to be a dangerous shift in the course of the confrontation, stressing that Iraq would be among the most affected if Iran's production base was undermined, especially in the gas and electricity sectors.  He explained that the current scenario is a decline or absence of Iranian gas exports to Iraq and Turkey, which could lead to a severe electricity crisis in Iraq coinciding with the peak of summer.  He warned that the mutual bombing of gas facilities could disrupt global supply chains, pointing to the possibility of targeting Israeli gas platforms overlooking the Mediterranean, on which Israel relies for 70% of its electricity production. 

Al-Marsoumi believed that the most dangerous scenario would be for Iran to resort to closing the Strait of Hormuz, which would lead to the loss of a quarter of global gas exports and 17 million barrels of oil per day. This would particularly affect Iraq and Kuwait, given that their exports pass through the strait.  He pointed out that the United States has begun preparing for this scenario by drawing on its strategic oil reserves, while Iraq and Kuwait do not have alternative options for exporting oil, unlike Iran, Saudi Arabia, and the UAE, which have established alternative infrastructure. 

He warned that Iraq may be forced to offer political and economic concessions to American companies operating in Kurdistan to resume exports via the Turkish Ceyhan pipeline, believing that continued escalation will weaken Iraq's ability to import spare parts and turbines related to power plants.  Al-Marsoumi concluded by saying that wars open the way to even the most pessimistic scenarios, noting that merely threatening to close the Strait of Hormuz could raise global transportation and insurance costs, which would have a direct impact on Iraq.

The size of Iraq's external and internal debt

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The Central Bank of Iraq revealed on Saturday the size of Iraq's external and domestic debts for 2024.

The bank stated in an official statistic, a copy of which was received by the (Video News) Agency, that the volume of debt owed by Iraq in 2024 amounted to 54 billion and 601 million dollars, a decrease of 2.94% compared to 2023, in which the debt amounted to 56 billion and 207 million dollars.
It added that the internal public debt amounted to 85 trillion and 586 billion dinars at the end of June, an increase compared to 2024, in which the internal debt amounted to 83 trillion and 80 billion dollars.

An economic expert told Al-Jarida Platform: The exchange rate is hostage to the political mood and regional shifts.

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Economist Ahmed Hadhal spoke about the sensitivity of the dollar issue in Iraq and its direct impact on geopolitical and geoeconomic changes, emphasizing that the issue has become extremely complex internally and externally.

In an interview with Jarida Platform, Hathal stated that “since the end of 2022, and with the launch of the platform, the Central Bank has exhausted all monetary policy tools to address the gap between the parallel rate and the official rate. However, the problem is complex and does not only relate to the bank but also to the domestic market.” He explained that “60% of traders are still outside the platform, in addition to the lack of borders, which further complicates the crisis.”

He added that "the decline in the dollar's value coincided with the failure to approve the general budget and the instability of some foreign negotiations. The exchange rate is linked to economic, political, and media factors, and is a highly sensitive indicator of any crisis, statement, or event." He noted that "exchange rate fluctuations directly impact the purchasing power of citizens, merchants, companies, industrialists, importers, and even foreign investors."

Hedhal explained that "the loss of trust between society and the government is one of the most significant factors driving demand for the dollar as a more stable and valuable currency, especially given the lack of real production within Iraq. Oil production constitutes more than 70% of the GDP, and the general budget constitutes 190% of this GDP. These indicators raise concerns among citizens and investors about the possibility of a decline in the value of the dinar."

He concluded by saying, "The exchange rate issue is linked to the psychological factors of citizens and investors, and there is a close relationship between behavioral economics and traditional economics, which makes currency stability necessitating addressing confidence in monetary and fiscal policies, ensuring their stability, and preventing sudden changes."

After Iran's threat, how will Iraq be affected by the closure of the Strait of Hormuz?

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The ongoing escalation between Israel and Iran is raising concerns in global markets, amid fears that political tensions could escalate into a full-blown energy crisis.

With increasing talk of the possibility of targeting Iranian facilities, scenarios loom on the horizon that could directly impact global oil supplies and threaten the stability of regional economies, particularly Iraq.
Iran has threatened to close the Strait of Hormuz in response to Israeli attacks. Iranian state-run IRIB TV3 reported in June 2025 that the closure of the Strait of Hormuz by Iran and the Bab al-Mandab Strait by the Houthis is a realistic possibility, in response to the escalation by the occupying forces.

Repercussions on the Iraqi economy

In turn, economic expert Safwan Qusay warned that “escalating tensions between Israel and Iran could lead to serious disruptions in the global oil market, amid expectations that Iranian production w

Oil rises, the dinar falls, and Baghdad faces the ramifications of Israeli-Iranian missiles.

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 Although it is outside the immediate circle of conflict, Iraq appears to be in the eye of the storm. Its geographical location, its near-total dependence on oil, and the peg of its economy to the dollar exchange rate make it vulnerable to every geopolitical shock in the region. While Israel and Iran exchange airstrikes and inflammatory statements, the Iraqi market translates these fires into tangible crises: rising food prices, a volatile dollar, and fears of a slowdown in the flow of goods through ports and borders.

As Israeli airstrikes on Iran escalated, the Iraqi dinar began to slide. This decline is not merely a technical result of changes in the currency markets; it is an expression of general panic and deep concern about political and security repercussions that Iraq may not be able to contain. Dealing with the US dollar is no longer just an economic issue; it has also become highly politically sensitive, especially with the US Treasury Department's strict oversight of transfer and financing mechanisms within Iraq.

On Friday, following the unprecedented Israeli airstrikes on Iranian facilities, oil prices jumped nearly 5%, while the Iraqi dinar fell dramatically against the dollar, exceeding 146,000 dinars to $100 in some local markets, its lowest level in months.

Meanwhile, global oil markets are experiencing significant turmoil, with JP Morgan warning that oil prices could rise to $120 per barrel if geopolitical tensions in the Middle East escalate further.

Global oil prices rose, with Brent crude closing at $74.23, up 4.87%, while US crude also closed at $72.98, up 4.94%.

The dinar is the first to be affected

"What's happening in Tehran is directly felt in the markets of Rusafa and Karkh," says Ahmed Eid, an economic researcher, referring to the close relationship between regional stability and the status of the local currency.

"The sudden rise in the dollar price reflects a real state of panic, not only about the developments in the conflict, but also about its potential financial repercussions, especially if the United States resorts to tightening controls on transfers from the US Federal Reserve or imposing new banking restrictions," he added in an interview with Shafaq News.

Eid warns that the continued smuggling of dollars from Iraq to Iran is fueling monetary instability, saying, "The Iraqi economy is dependent on external balance. We don't produce; we buy everything from abroad, and with every tremor in the region, we are the first to suffer."

Black gold: a temporary gain or an impending disaster?

At first glance, high oil prices appear to be an opportunity to boost Iraq's treasury, especially given that more than 90% of its budget relies on crude oil revenues. However, recurring threats to energy corridors, most notably the Strait of Hormuz, reveal the fragility of this "profit." Every additional barrel sold today may not find a safe route tomorrow. Worse still, proposed alternatives, such as the Turkish Ceyhan pipeline, provide only partial coverage, amid ongoing logistical and political challenges.

"This short-term profit does not hide the real danger," says economic expert Safwan Qusay.

"Any threat to the Strait of Hormuz would mean that more than 3 million barrels of Iraqi oil per day would be at risk," Qusay says. "Even if the Turkish Ceyhan pipeline were activated as an alternative route, it would cover only a third of exports, with burdensome logistical costs requiring thousands of trucks."

Approximately one-fifth of the world's oil trade—between 18 and 19 million barrels per day—passes through the Strait of Hormuz. Any military escalation affecting this vital artery would mean not only an Iraqi oil crisis, but also enormous pressure on prices and cash flows.

The indirect repercussions, however, appear more vague. The suspension of flights, the complexity of supply chains, and the potential displacement of Iranians or the return of Iraqi students and workers from Iran all add a new burden to the Iraqi state.

Financial expert Mahmoud Dagher told Shafaq News Agency that Iraq is still in the "economic resilience" phase, benefiting from high oil prices, but the door is open to more severe possibilities.

"The worst scenario is the closure of the straits, whether in the Arabian Gulf or the Red Sea, a card that Tehran or its allies in Yemen could play," Dagher says, adding that "this would be an uncontainable blow, not only to the Baghdad government, but to the entire Middle Eastern economy."

Iraq does not appear to have sufficient room for maneuver in this crisis. Between its near-total dependence on oil, weak domestic production, and the import of most basic commodities, any regional unrest becomes a daily matter for Iraqi citizens. As the crisis between Israel and Iran continues, attention is turning not only to the military fronts but also to the markets of Baghdad, where currencies, commodities, and fear determine the fate of millions.

In the absence of a real local production structure, the Iraqi economy is becoming something of a vehicle, completely linked to the regional locomotive.

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Iraq's trade with Iran is again confusing the dollar. Hantoush warns of a tight spot!

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Economic expert Mustafa Hantoush confirmed that Iraq still has significant trade with Iran that is not covered by the official price, leading to continued pressure on the parallel market.

In a statement to Jarida Platform , Hantoush stated that “millions of travelers to Iran are also contributing to increased pressure on the parallel market. With the improvement of the Iranian currency thanks to negotiations with the United States and the reduction of remittances, this pressure has eased somewhat.” He explained that “the Central Bank’s step to increase the limits on some cards has partially contributed to the solution, but the worsening situation and the return of remittances may push the parallel exchange rate up again.”

He added, "Iraq is now required to adopt new monetary policies to manage trade with Iran and passenger traffic. The solution may be through a tripartite account or a gold barter, as some countries in the region are doing, to extricate Iraq from this tight spot."

Baghdad Now: Coordination Framework leaders hold a meeting to discuss the latest developments.

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The Coordination Framework is currently holding an emergency meeting in Baghdad in light of recent developments in the region and the exchange of fire between Iran and Israel.

Ancient Mesopotamian boats return to the waters of Iraq's Basra | REUTERS

Nice report on Kurdistan in English

Miss the last episode of My FX Buddies? Catch it below:

Is the Iraqi Dinar in Danger? Government Official Sets the Record Straight

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