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%.

Ask AI · How Saudi Arabia’s geographic advantage helped it grow revenue against the odds during the embargo crisis?

The Strait of Hormuz blockade threat is continuing to heat up, but the fates of Middle East oil-producing countries’ oil wealth have already sharply diverged.

According to Reuters, in March Saudi Arabia saw its oil revenues rise 4.3% against the tide, thanks to its geographic advantage of bypassing through rerouted pipelines; Iran’s oil revenues jumped 37% as oil prices surged; and Iraq, which is highly dependent on the Strait of Hormuz, suffered the steepest revenue drop among the Middle East’s major oil producers in this crisis.

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

Geography drives life-and-death divergence

The real substance of this threat to blockade Hormuz is a redistribution of oil wealth centered on geographic location.

There are fundamental differences in how dependent the Middle East’s major oil producers are on this crucial route, leading to widely divergent fiscal performance across countries in March. According to Reuters, geographic factors are regarded as the primary variable determining the direction of oil revenues for oil producers in this round of crisis.

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

According to Reuters, this west-to-east pipeline in Saudi Arabia was built during the Iran-Iraq war period and was specifically designed to bypass the Strait of Hormuz. As the risk of a blockade continues to rise, the pipeline’s strategic value has become increasingly prominent, ensuring that Saudi crude exports are not disrupted by the situation in the strait. Meanwhile, the risk premium driven by the crisis pushed oil prices higher, further magnifying Saudi Arabia’s royalty and tax revenue.

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

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

Oil price increases spawned by the crisis produced a significant offset effect on the fiscal front, making Iran unexpectedly one of the biggest beneficiaries of revenue growth during this period.

Among the Middle East’s major oil producers, the impact on Iraq is the most direct and severe. As one of the countries with the highest dependence on exports through the Strait of Hormuz, Iraq recorded the biggest decline in oil revenues in March, reflecting the direct fiscal cost caused by geographic disadvantages under extreme geopolitical conditions.

The negative impact of heightened tensions in the Strait of Hormuz has also spread to Asian capital markets. According to Reuters, India’s financial stocks recorded the largest-ever single-month net foreign outflows in March. Concerns among overseas investors about the impact of the Iran war on India’s economic growth and corporate earnings outlook have continued to intensify, further increasing downward pressure on India’s stock market and putting persistent drag on the rupee exchange rate.