The Strait of Hormuz is shrouded in ominous blockade clouds, with Saudi Arabia’s March oil revenue not falling but rising by 4.3%, and Iran’s revenue increasing by 37%.

The threat of a Strait of Hormuz blockade continues to intensify, but the fate of oil wealth for Middle East oil-producing countries has already sharply diverged.

According to Reuters, in March Saudi Arabia saw oil revenue rise 4.3% against the trend thanks to its geopolitical advantage via bypass pipelines; Iran’s oil revenue surged 37% driven by a jump in oil prices; and Iraq, which is highly dependent on the Strait of Hormuz route, suffered the worst revenue decline among the Middle East’s major oil producers in this crisis.

Geographic location is the core variable determining the direction of oil and gas income for each country in this crisis. Saudi Arabia has a west-east oil pipeline built during the Iran-Iraq War, giving it the ability to export directly while bypassing the Strait of Hormuz, and allowing it to capture higher royalties and tax revenues from rising oil prices. At the same time, the geopolitical premium triggered by the risk of a blockade pushed up the oil price baseline, allowing Iran to benefit unexpectedly as well.

Geographic location drives the split in fortunes

The essence of this threat to the Strait of Hormuz is a redistribution of oil wealth centered on geographic location.

Middle East’s major oil-producing countries differ fundamentally in how dependent they are on this crucial shipping lane, leading to widely divergent fiscal performances among countries in March. According to Reuters, geographic factors are seen as the primary variable determining the direction of oil income for oil producers in this round of crisis.

Saudi Arabia’s oil revenue grew 4.3% in March, supported by two factors: the smooth operation of alternative export routes, and higher fiscal returns brought by rising oil prices.

According to Reuters, Saudi Arabia’s west-east pipeline was built during the Iran-Iraq War and is specifically designed to bypass the Strait of Hormuz. As blockade risks continued to rise, the pipeline’s strategic value became increasingly prominent, ensuring that Saudi crude exports were not disrupted by developments in the strait. Meanwhile, the risk premium driven by the crisis pushed oil prices higher, further amplifying Saudi Arabia’s royalty and tax revenue.

Iran sees a surge in revenue as oil prices spike by 37%

Despite being at the heart of the dispute, Iran’s March oil revenue still recorded a sharp 37% increase, the largest gain among the Middle East’s major oil producers.

The oil price rise, generated by the crisis, produced a significant offset effect at the fiscal level, making Iran one of the unexpected beneficiaries with the largest revenue growth in this cycle.

Among the Middle East’s major oil-producing countries, Iraq is facing the most direct and severe impact. As one of the countries most dependent on exports through the Strait of Hormuz, Iraq recorded the largest decline in March oil revenue, reflecting the direct fiscal cost caused by geographic disadvantages under extreme geopolitical conditions.

The negative impact of tensions in the Strait of Hormuz has extended to Asian capital markets. According to Reuters, India’s financial stocks recorded the biggest historical monthly net foreign outflow in March. Concerns among overseas investors about how the Iran-war shock will affect India’s economic growth and companies’ earnings prospects continued to heat up, further intensifying downward pressure on India’s stock market and creating ongoing drag on the rupee exchange rate.

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