Pakistan Faces Rising Energy Risks as Oil Prices Surge Amid Middle East Tensions

Pakistan Faces Rising Energy Risks as Oil Prices Surge Amid Middle East Tensions​

Strait of Hormuz Concerns Intensify Pressure on Import-Dependent Economy​

New Delhi, March 20 – A sharp rise in global oil prices, driven by escalating geopolitical tensions in the Middle East, has heightened concerns over energy security and economic stability in Pakistan, according to a report.

The situation has brought renewed focus on the Strait of Hormuz, a critical maritime route that facilitates nearly 20 percent of global seaborne oil trade. Ongoing conflict in the region has raised questions about the safety and continuity of shipments passing through this strategic chokepoint.

Heavy Dependence on Gulf Oil Increases Vulnerability​

Pakistan remains particularly exposed due to its reliance on imported energy. More than 80 to 85 percent of its oil imports originate from Gulf nations such as Saudi Arabia, the UAE, and Kuwait, with shipments routed through the Strait of Hormuz.

Petroleum products also form a substantial portion of the country’s import structure, accounting for nearly 30 percent of total imports. This dependency amplifies the economic impact of any disruption in global oil supply or price volatility.

Rising Oil Prices May Inflate Import Bill and Widen Deficit​

The report highlights that a $10 per barrel increase in global crude prices could raise Pakistan’s annual import bill by $1.8 billion to $2 billion.

In the event of a prolonged disruption, such as a three-month closure of the Strait of Hormuz, monthly import costs could escalate to between $3.5 billion and $4.5 billion. Such a scenario may also push inflation levels to 15 to 17 percent.

Additionally, higher freight and insurance costs linked to geopolitical risks could further widen the trade deficit and place additional strain on foreign exchange reserves.

Limited Strategic Reserves Add to Economic Risks​

Pakistan’s energy reserves remain constrained, with strategic stocks sufficient for only 10 to 14 days of consumption. This limited buffer reduces the country’s ability to absorb prolonged supply disruptions.

The report contrasts this with India’s relatively stronger reserves and foreign exchange buffers, which provide greater resilience against external shocks.

Oil Price Surge Adds Pressure on Economic Recovery​

The report warns that a sustained spike in oil prices could derail Pakistan’s ongoing economic recovery. It may widen the current account deficit and accelerate inflation, especially as the country continues efforts to stabilize its economy under an IMF program.

Meanwhile, crude oil prices have surged significantly amid the geopolitical tensions. As the Middle East conflict entered its 21st day, Brent crude climbed nearly 40 percent, rising from $77.74 on March 2 to $108.65 on March 19. US WTI crude futures also recorded gains of 31.91 percent during the same period.