Islamabad:Prof Abida Naurin from Pakistan Institute of Development Economics (PIDE) in a study has warned that escalating geopolitical tensions in the Middle East could trigger a sharp increase in global oil prices, posing serious risks for Pakistan’s inflation outlook, external balance and overall economic stability.
The study highlights Pakistan’s structural vulnerability due to its heavy dependence on imported petroleum and limited strategic reserves. It notes that rising geopolitical risks surrounding the Strait of Hormuz already pushed crude oil prices upward in early 2026. As tensions linked to the US–Israel–Iran conflict intensify, the resulting uncertainty added a significant geopolitical risk premium to global energy markets, increasing volatility in oil prices.
Pakistan remains particularly exposed to these developments because petroleum products account for nearly 30 percent of its total imports. According to the analysis, every $10 increase in global oil prices could raise Pakistan’s annual petroleum import bill by approximately $1.8–2.0 billion, while also transmitting inflationary pressures across the economy through higher transport, energy, and food costs.
The study warns that in a worst-case scenario—such as a three-month disruption in the Strait of Hormuz, global oil prices could surge to between $120 and $150 per barrel. Under such circumstances, Pakistan’s monthly petroleum import bill could rise sharply to between $3.5 and $4.5 billion, while consumer inflation could climb from around 7 percent to as high as 15–17 percent.
The research further highlights Pakistan’s structural exposure to energy shocks. The country imports nearly 80–85 percent of its petroleum requirements, with most shipments passing through a single maritime route via the Strait of Hormuz before reaching Karachi and Port Qasim. With petroleum reserves covering only about 10–14 days of consumption, Pakistan has limited buffers to absorb supply disruptions compared to regional peers such as India, which maintains significantly larger strategic reserves.
To mitigate these risks, the study recommends in short term calls for strengthened monitoring of fuel stocks, diversification of import routes and suppliers and the exploration of oil hedging strategies to protect against price volatility. In the medium to long term, the report stresses the importance of expanding strategic petroleum reserves, diversifying energy imports and accelerating investments in renewable energy and energy efficiency to reduce Pakistan’s vulnerability to global oil shocks.
