Global conflicts often send shockwaves through economies far beyond the battlefield, and Pakistan may once again find itself among the most vulnerable. With oil prices climbing toward the $100 mark amid escalating tensions in the Middle East, economists warn that Pakistan’s already delicate economic recovery could face another serious setback.
Former finance minister Hafiz Pasha has cautioned that if oil prices remain elevated and regional conflict persists, Pakistan’s economic growth could decline by as much as 1 to 1.5 percent. While that figure might appear modest at first glance, for a country struggling to maintain even moderate growth, such a hit could reverse the fragile stability achieved in recent years.
Rising Oil Prices and the Import Burden
Pakistan relies heavily on imported energy, making it particularly sensitive to fluctuations in global oil markets. When oil prices rise, the country’s import bill expands rapidly. Economists estimate that every $10 increase in the global oil price adds roughly $1.5 billion to Pakistan’s annual import costs.
If prices stay around $100 per barrel—about $20 above earlier baseline levels—the country could face an additional $3 billion in oil-related expenses alone. This surge in costs would place severe pressure on Pakistan’s external accounts, which are already under strain.
The former governor of the State Bank, Ishrat Hussain, warns that the combined impact of higher oil prices, shipping costs, and insurance premiums could deliver a shock of up to $12–14 billion to Pakistan’s external sector over the next year. Such an increase could push the current account deficit far beyond its manageable level.
Remittances Under Threat
Another concern lies in remittances, a lifeline for Pakistan’s economy. More than half of the country’s remittance inflows come from Middle Eastern nations. If these oil-dependent economies slow down due to disruptions in exports or regional instability, job opportunities for migrant workers may shrink.
Historically, foreign workers from South Asian countries are often the first to be laid off during economic downturns in the Gulf. Should that pattern repeat itself, Pakistan could lose between $2 billion and $4 billion in remittance inflows—further worsening its balance of payments position.
Inflation Could Return With Force
Higher oil prices rarely affect only fuel costs. Instead, they trigger a chain reaction across the entire economy. Petrol and diesel prices rise first, followed by increases in transportation expenses. These costs then spread to food prices, consumer goods, and services.
Inflation in Pakistan had recently begun to stabilize, hovering around single digits earlier this year. However, rising global energy prices have already pushed inflation back above 10 percent. If oil prices surge further—similar to levels seen during the Russia–Ukraine War—Pakistan could once again experience inflation approaching the extreme levels witnessed during that period.
Pressure on Key Economic Sectors
Several sectors of the Pakistani economy would feel the pressure most intensely. Transportation, which accounts for a significant share of economic activity, would likely contract as higher fuel prices reduce travel and logistics demand.
Industrial production could also suffer. Disruptions in imported liquefied natural gas have already begun affecting fertilizer plants, cement factories, and textile manufacturers that depend on gas-powered energy systems.
Agriculture, too, may face difficulties if fertilizer shortages emerge due to supply disruptions. Reduced fertilizer availability could impact crop productivity in the next planting season, potentially affecting food supply and rural incomes.
Dependence on Imported Energy
Pakistan’s reliance on imported liquefied natural gas has long been viewed as a structural vulnerability. Recent disruptions, particularly those affecting supplies from QatarEnergy, highlight the risks of depending heavily on foreign energy sources.
However, the crisis may also push Pakistan to accelerate its transition toward domestic