A new report by the Pakistan Institute of Development Economics (PIDE) warns that rising tensions in the Middle East could create serious economic challenges for Pakistan. According to the study, global oil prices could jump to between $120 and $150 per barrel in a worst-case situation if the conflict spreads in the region.
The report says that if shipping through the Strait of Hormuz is disrupted, Pakistan’s inflation rate could rise sharply. Inflation, which is currently around 7%, could increase to between 15% and 17%, putting more pressure on households already dealing with high living costs.
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Higher oil prices would also increase the country’s import spending. Economists estimate that Pakistan’s monthly oil import bill could rise to between $3.5 billion and $4.5 billion if global prices continue to surge.
The study highlights that petroleum products make up nearly 30% of Pakistan’s total imports. This heavy reliance on imported fuel makes the country especially vulnerable to sudden changes in international oil prices.
Experts say that even small increases in oil prices can significantly impact Pakistan’s economy. For example, every $10 increase in the global price of oil could add between $1.8 billion and $2 billion to the country’s yearly import bill.
The report also outlines several possible economic scenarios. If oil prices remain between $92 and $110 per barrel, inflation could rise to between 10% and 15%, while the import bill may increase by $8 billion to $10 billion.
In a more difficult situation where oil supply disruptions continue for three months, inflation could climb further to between 15% and 18%. At the same time, Pakistan’s oil import bill could surge by $18 billion to $36 billion, which would significantly widen the country’s current account deficit.
Pakistan imports about 80% to 85% of its petroleum needs, mostly from Gulf countries through the Strait of Hormuz. Any disruption in this route could delay shipments and increase shipping, freight, and insurance costs. This would make fuel even more expensive for the country.
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Another concern highlighted in the report is Pakistan’s limited fuel reserves. The country currently has petroleum stocks sufficient for only about 10 to 14 days of consumption. This is much lower compared to countries like India, which has strategic oil reserves that can cover around 65 to 70 days of demand.
To reduce these risks, the study recommends several urgent steps. These include diversifying oil import sources, building larger strategic petroleum reserves, investing more in renewable energy, and exploring alternative supply routes so that the country does not rely heavily on a single maritime corridor.
