Pakistan warns oil spike from Mideast conflict could hit economy

Pakistan’s government has warned that the widening conflict in the Middle East could send a fresh economic shock through the country by lifting oil prices, swelling import costs and putting renewed strain on the external sector. The warning came on Monday from Planning Minister Ahsan Iqbal during the launch of the Ministry of Planning’s Monthly Development Report, placing energy-market volatility at the centre of Pakistan’s immediate economic concerns.

The minister said the country remains highly exposed to any disruption in global fuel supply chains because of its heavy reliance on imported petroleum. In practical terms, that means any prolonged rise in crude prices can quickly feed into domestic inflation, transport expenses, industrial costs and the government’s broader fiscal calculations. With tensions around key shipping routes again rattling markets, Islamabad is now openly acknowledging that events far beyond its borders could have a direct effect on daily economic life at home.

Iqbal described the Middle East crisis as a major external shock at a time when Pakistan had been working to stabilise key macroeconomic indicators. He said higher oil prices could push up the import bill and place pressure on the balance of payments, while also complicating efforts to preserve economic momentum. He further pointed to Pakistan’s vulnerability to interruptions in maritime routes, especially through the Strait of Hormuz, a passage that remains critical to the movement of global energy supplies.

At the same time, the government sought to show that the economy is not entering this risk phase from a position of collapse. Iqbal said growth improved to 3.8% in the first half of the current fiscal year, compared with 1.9% in the same period a year earlier. He also highlighted a recovery in large-scale manufacturing, which posted growth of 5.9% during July to February, suggesting that parts of the domestic economy had regained some strength before the latest external pressure emerged.

The official data shared by the minister painted a mixed picture rather than a simple recovery story. Average inflation during July to March stood at 5.7%, slightly above the comparable period last year, while March inflation rose sharply to 7.3% from just 0.7% a year earlier, largely because of higher transport and energy costs. That detail matters because it shows how quickly global fuel movements can re-enter Pakistan’s inflation cycle even after a period of relative easing.

The government also used the briefing to underline areas where it believes stabilisation has taken hold. Remittances were reported at $30.3 billion, up 8.2%, while exports of goods and services reached $30.6 billion during July to March. The current account posted a surplus of $1.07 billion in March, although the cumulative surplus for the first nine months of the fiscal year narrowed to only $8 million, much lower than last year. Tax collection by the Federal Board of Revenue was said to have reached Rs9.3 trillion, while development spending under the PSDP stood around Rs415 billion.

Officials argued that the government has already tried to soften the blow from international oil volatility. Iqbal said the state had only partially passed on a Rs55 per litre increase in petroleum prices and absorbed a substantial fiscal cost to shield consumers. He added that later adjustments, including relief measures and changes in the petroleum levy, were aimed at balancing public protection with broader macroeconomic management. Even so, the minister’s warning suggested there are limits to how much insulation any government can provide if regional instability persists.

The deeper significance of the warning lies in what it says about Pakistan’s current stage of recovery. The country may have regained some macroeconomic footing, but it remains vulnerable to imported shocks, especially those linked to fuel, freight and geopolitics. A surge in oil prices does not stay confined to energy statistics; it can alter inflation expectations, squeeze household budgets, raise business costs and complicate monetary and fiscal planning across the board.

For Pakistan, the coming weeks will be crucial. If regional tensions cool and shipping routes remain functional, the latest warning may serve mainly as a cautionary note. But if the conflict deepens and crude prices stay elevated, the country could face a fresh test of economic resilience just as it has been trying to consolidate stability. In that scenario, the government’s challenge will be to protect growth and consumers at the same time without allowing another imported energy shock to derail the fragile recovery it says it has worked hard to rebuild.