Hormuz closure boosts oil, lifts prospects for Azerbaijan’s export revenues

The war unfolding in the Middle East is sending shockwaves far beyond the immediate battlefield. Like many nations, Azerbaijan is watching events in the region with growing concern. The conflict is not merely a geopolitical confrontation; it carries profound economic implications that could reshape trade routes, energy markets, and inflation trends across the broader region.

Disruptions to logistics corridors are among the first visible consequences. The suspension or slowdown of cargo flows through key routes threatens supply chains that connect Asia, the Gulf, and Europe. For regional economies, the interruption of trade with Iran, long known for exporting relatively affordable goods, could trigger price increases. Countries that rely on Iranian imports for certain consumer and industrial products may soon feel upward pressure on domestic inflation.

At the same time, the reported closure of the Strait of Hormuz, through which roughly 20 percent of the world’s oil supply is transported, has already rattled global energy markets. Oil prices have surged by more than 9 percent in response to the escalating tensions. For energy-importing industrial powers such as Turkiye, higher oil prices translate directly into increased production costs. As one of the region’s largest manufacturing hubs, Turkey could face renewed inflationary pressures if elevated energy prices persist.

In short, the combination of disrupted Iranian production and rising energy costs in industrial economies may create an inflationary environment across the wider region. Yet history reminds us that crises often carry hidden opportunities.

For Azerbaijan, the turmoil to the south could paradoxically reinforce one of its most important economic pillars: currency stability. The Azerbaijani manat has remained relatively stable against the U.S. dollar for much of the past decade. This stability has not been accidental. It has been underpinned by a persistent positive trade balance driven largely by energy exports.

Since gaining independence, Azerbaijan’s foreign trade balance has ended in deficit only seven times, all during the turbulent 1990s. From the early 2000s onward, the country has consistently been a net exporter. In several years, for example, in 2008, export revenues exceeded imports by multiple times. This structural surplus has been one of the key factors supporting the manat’s resilience.

However, the last three years have revealed a different trend. Azerbaijan’s exports have declined while imports have risen steadily. In 2023, exports totaled $33.9 billion while imports stood at $17 billion. In 2024, exports fell to $26.6 billion, while imports climbed to $21 billion. By 2025, exports decreased further to $25 billion, while imports reached $24.4 billion. As a result, the trade surplus narrowed dramatically — from $16.6 billion in 2023 to $5.5 billion in 2024, and then to just $660 million in 2025.

These figures sparked concern among experts, some of whom predicted that Azerbaijan could face a negative trade balance as early as 2026. A shrinking surplus weakens the structural support for currency stability and raises questions about long-term macroeconomic resilience.

Yet the current geopolitical crisis may alter that trajectory. Initially, Washington suggested that military operations would last only four days. That estimate later expanded to four weeks. Recent developments suggest the confrontation could stretch beyond a month, particularly as strategic objectives appear more difficult to achieve than initially anticipated. The longer the conflict persists, the more sustained its impact on global energy markets is likely to be.

The closure of the Strait of Hormuz and the effective removal of Iranian oil from global markets have already pushed crude prices higher. Even if hostilities subside within weeks, energy markets may remain tight for some time due to lingering uncertainty and supply adjustments.

Additionally, disruptions in LNG exports from Gulf countries have reportedly driven natural gas prices in Europe up by as much as 50 percent. Given that nearly 90 percent of Azerbaijan’s export revenues come from oil and gas, sustained higher energy prices could significantly boost export earnings.

If this trend continues, Azerbaijan’s trade surplus could rebound to more comfortable levels in 2026. A stronger external balance would, in turn, reinforce confidence in the manat’s stability against the dollar.

None of this diminishes the human and geopolitical risks of the conflict. War remains an inherently destabilizing force. But from a strictly economic perspective, Azerbaijan’s position as a major energy exporter may provide a buffer against regional turbulence.

The coming months will determine whether this crisis becomes a prolonged shock to the global economy or a short-lived disruption. For Azerbaijan, much will depend on the durability of high energy prices and the government’s ability to manage rising imports while capitalizing on export gains.