Strait of Hormuz closure can Double Inflation in Pakistan, experts warn

2026-03-14 - 11:44

ISLAMABAD – Pakistan, the country of around 250 million, is on the verge of severe economic jolt as military escalation between the US, Israel, and Iran continues unabated, closing crucial Strait of Hormuz. Experts warn that such a scenario could send global oil prices skyrocketing, putting Pakistan’s economy under immense pressure. A new report by Pakistan Institute of Development Economics (PIDE) reveals shocking figures as nearly 20% of the world’s oil trade passes through the Strait of Hormuz, and global crude oil prices have already surged by 30% in early March 2026, fueled not by supply and demand but a “geopolitical war premium.” Pakistan, heavily dependent on imported energy, is especially vulnerable. Petroleum imports make up about 30% of the country’s total imports, and every $10 rise in oil prices could inflate Pakistan’s annual import bill by $1.8–2 billion. If the Strait of Hormuz remains blocked for three months, crude oil prices could soar to $120–150 per barrel, pushing Pakistan’s monthly oil import costs to a staggering $3.5–4.5 billion. The report warns this could double the current inflation, which was 7% in February 2026, potentially surging to 15–17%. The ripple effects would be immediate: higher fuel costs would push up transportation, food, and energy prices, hitting ordinary Pakistanis hard. PIDE emphasizes that ongoing regional tensions threaten to derail Pakistan’s economic recovery. The nation relies heavily on crude oil from Gulf countries, almost all of which passes through the Strait of Hormuz. Any disruption in this vital passage could directly destabilize the economy. While alternative supply routes via the Red Sea with Saudi Arabia are being explored, these come with limited capacity, higher costs, and longer delivery times, making them only a temporary fix. The report urges urgent action: expand strategic oil reserves, secure alternative supply routes, adopt targeted hedging policies to manage price shocks, and implement short-term financial measures to cushion the economy from the looming crisis. With the world watching tensions rise in the Middle East, Pakistan faces a perfect storm of economic pressure—one that could hit inflation, imports, and overall stability harder than any recent crisis. Petrol could have Hit Rs 370/Litre in Pakistan, But PM rejects Rs 50 Hike