Clouds of a Hormuz blockade loom as Saudi Arabia's oil revenue in March rises by 4.3% instead of declining, while Iran's increases by 37%.

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The threat of a blockade of the Strait of Hormuz continues to escalate, but the oil wealth of Middle Eastern oil-producing countries has already undergone drastic divergence.

According to Reuters, in March Saudi Arabia leveraged its geographic advantage with bypass pipelines to achieve a 4.3% increase in oil revenues; Iran’s oil revenue surged 37% driven by soaring oil prices; whereas Iraq, which is highly dependent on the Hormuz passage, suffered the largest drop in revenue among major Middle Eastern oil producers during this crisis.

Geographical location is the core variable determining the direction of oil and gas income for each country in this crisis. Saudi Arabia possesses an east-west pipeline built during the Iran-Iraq war, enabling it to bypass the Strait of Hormuz and directly export oil, thus gaining higher royalties and tax revenue from rising oil prices. Meanwhile, the geopolitical premium triggered by blockade risks has pushed up benchmark oil prices, allowing Iran to benefit unexpectedly.

Geographical Position Drives Divergence of Fortunes

The essence of the Hormuz blockade threat is a redistribution of oil wealth centered around geographical location.

Major Middle Eastern oil-producing countries have fundamentally different levels of dependence on this crucial passage, resulting in vastly different fiscal performances in March. According to Reuters, geography is seen as the primary variable determining the trajectory of oil revenue for oil-producing countries during this crisis.

Saudi oil revenues grew 4.3% in March, buoyed by two factors: the smooth operation of alternative export routes and higher fiscal returns from rising oil prices.

According to Reuters, Saudi Arabia’s east-west pipeline was built during the Iran-Iraq war and specifically designed to bypass the Strait of Hormuz. As the risk of blockade continues to rise, the strategic value of this pipeline has become increasingly prominent, ensuring Saudi oil exports are undisturbed by developments in the strait. At the same time, the risk premium driven by the crisis has pushed oil prices higher, further amplifying Saudi’s royalties and tax revenues.

Iran Achieves 37% Revenue Increase Thanks to Soaring Oil Prices

Despite being at the heart of the dispute, Iran’s oil revenues surged by 37% in March, the most prominent increase among major Middle Eastern oil producers.

The crisis-induced rise in oil prices has had a significant offsetting effect at the fiscal level, making Iran one of the biggest beneficiaries in terms of revenue growth during this period.

Among major Middle Eastern oil producers, Iraq has suffered the most direct and severe impact. As one of the countries most dependent on the export route via the Strait of Hormuz, Iraq experienced the largest decline in oil revenue in March, directly highlighting the fiscal cost of geographic disadvantage in extreme geopolitical situations.

The negative effects of the Hormuz tension have extended to Asian capital markets. According to Reuters, India’s financial stocks saw a record single-month net outflow of foreign capital in March, with growing concerns among overseas investors about the impact of war with Iran on India’s economic growth and corporate profitability. This has further increased downward pressure on India’s stock market and continued to weigh on the rupee’s exchange rate.

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