Iraq experienced a critical and turbulent period between 2003 and 2020, marked by political instability and emergency conditions that directly impacted the country's structure, performance, and economy. In light of this, this study aimed to analyze the effect of fluctuations in oil revenues on key macroeconomic variables in Iraq, specifically unemployment and inflation, during the period 2005–2020. The research employed the Variable Regression (VAR) model and the Error Correction (ECM) model, based on official annual data analyzed using EViews 12 software. Reliability tests and cointegration techniques were applied to assess short-term and long-term relationships. The results indicate that the Iraqi economy is heavily dependent on oil revenues, which constituted more than 90% of total public revenues in most of the years included in the study. The study reveals that oil revenues peaked at 119.4 trillion Iraqi dinars in 2012, then declined to 54.4 trillion Iraqi dinars in 2016. Unemployment rose from 18% in 2005 to 30% in 2020, largely driven by lower oil prices and reduced fiscal capacity. Simultaneously, inflation fell significantly from 30.8% in 2005 to less than 1% between 2015 and 2020, reflecting government interventions and demand constraints. The VAR model results indicate a unidirectional causal relationship between oil revenue volatility and unemployment, highlighting the vulnerability of the Iraqi labor market to oil price shocks. Therefore, the study recommends diversifying the economy, investing oil revenues in other productive sectors, and adopting flexible budgeting practices to mitigate the impact of future oil price shocks.