ISLAMABAD – Due to the situation in the Middle East and a possible closure of the Strait of Hormuz, disruptions in oil supply could push inflation in Pakistan up to 12%, with prices likely to rise immediately if oil shipments are affected.
According to officials, the Pakistan Institute of Development Economics (PIDE) has released a study on the potential impact of a Hormuz closure on Pakistan’s economy. The report states that around 20 million barrels of oil pass through the strait daily, and any disruption could instantly increase prices.
The report warns that such a situation could impact Pakistan’s inflation and external account. Inflation, currently at 8.8%, may rise to as high as 12% due to supply disruptions.
PIDE estimates that within six months, inflation could reach 8.8% in a mild scenario, 10.4% under a moderate shock, and up to 12% in a severe scenario. Pakistan’s monthly oil import bill could increase by $384 million, potentially turning a current account surplus into a $4.6 billion deficit annually.
The report further notes that 22% of Pakistan’s imports consist of energy products, while shipping costs, insurance, currency depreciation, and taxes could further drive up prices.
PIDE has recommended urgent policy measures to mitigate negative impacts, emphasizing the importance of diesel used in transport, agriculture, and food sectors. It also suggested close monitoring of fuel pricing—especially diesel—and improving supply chains to reduce dependence on it.
