This study investigates the relationship between oil revenues and the GDP deflator in Iraq over the period 2004–2022, using annual time series data (n = 19) obtained from the Central Bank of Iraq, the Ministry of Planning, the World Bank, and the IMF. To address a gap in the literature regarding the limited use of the GDP deflator as a comprehensive measure of inflation in oil-dependent economies, the study employs the Autoregressive Distributed Lag (ARDL) bounds testing approach to analyze both short- and long-run dynamics. The findings indicate that oil revenues have a significant positive effect on the GDP deflator in the long run, reflecting the rentier structure of the Iraqi economy, while broad money supply influences price levels in the short run. In contrast, other macroeconomic variables show no significant long-term effects, suggesting that inflation is primarily demand-driven through oil revenue channels. The results highlight the importance of effective oil revenue management and the need for economic diversification policies to enhance price stability and support sustainable economic growth.