The war in the Middle East has a high toll on Pakistan in terms of economic pressures and insecurity. Pakistan lies at the crossroads of the Middle East and South Asia; therefore, Pakistan cannot treat the war as a distant geopolitical conflict. Rather, Pakistan’s economy has been in a constant decline since the beginning of the war. The energy crises due to the disruption of supply chains have fuelled the prices of oil, electricity, transport, and imports for Pakistan. For the volatile economy of the state, already undergoing huge economic pressure, currency depreciation, and rising inflation, the war could prove economically destabilizing. The situation gives rise to a pertinent question: How could the exacerbating energy crises of Pakistan pose a threat to its economic security?

Pakistan’s dependence on oil imports from the Gulf makes its economy susceptible to any instability in the region. Pakistan imports about 80% of its oil from the Gulf, which passes and reaches Pakistan through the Strait of Hormuz. The Strait, being a major flashpoint of conflict between Iran and the U.S., has exacerbated Pakistan’s vulnerabilities and pressures on the state economy. The renewal of tensions between the two states repeatedly creates massive consequences for Pakistan. The rising fuel prices, increasing electricity production costs, and the overall inflation surge of the country exert pressure on the already struggling economy of the country. Therefore, the energy sector remains the most affected area of Pakistan, which drains it economically.

Pakistan’s economy seemed to be recovering in 2026 compared to the economic insecurity of the previous years; however, the downward trend began since the war started. The International Monetary Fund praised Pakistan’s economic recovery at the start of 2026. As the war began on February 28,  the inflation rate began increasing from about 5.8% in January to 11.7% in May 2026. As global oil prices increased, Pakistan was forced to pass on the pressure to consumers through fuel prices’ adjustments. Currently, Pakistan’s petrol prices stand at more than Rs. 350 per litre. Moreover, as the tensions revived between Iran and the United States, the cross-border trade between Pakistan and Iran has come to a complete halt, threatening Pakistan’s economic security with a severe fear of LPG shortage. Additionally, hundreds of tonnes of food items like rice and mangoes are left at the risk of spoilage. All of this combined threatens Pakistan’s economy, which is already in a doldrum since the beginning of the war.

Pakistan has faced recurrent balance of payment crises, which have been intensified by the ongoing conflict. The current account deficit jumped to $4.26 billion in April. Although the deficit decreased in May, but the renewed tensions between Iran and the United States could potentially spill negative impact on the deficit again. The increased oil prices add to Pakistan’s import bills. The brunt of higher energy prices is borne by the exporters as the manufacturing costs increase. These vulnerabilities can create a need for financial assistance and further push Pakistan towards the recurrent pattern of IMF bailouts. Thus, Pakistan’s economic security has been greatly compromised through the exacerbation of its balance of payment crises.

The regional insecurity reduces the investor confidence in the region and disrupts the energy supply chains, creating implications for domestic industrial growth. Although Pakistan is not directly involved in the conflict but the spillover impact of the war is high. Investors generally avoid investing in such regions at times of high geopolitical uncertainty. The foreign direct investment in January stood at $173.28 million, which sharply decreased to about $54.5 million in April. This further constrains economic growth and job creation. Moreover, rising fuel prices and energy costs domestically contribute to the slower industrial growth. The increased prices make Pakistan’s exports less competitive, affecting its GDP growth and threatening Pakistan’s economic security.

Pakistan cannot directly control the conflict in the Middle East; instead, it can prepare itself to bear the economic shocks if the conflict prolongs further. Pakistan has already been proactively taking a diplomatic position, trying to mediate between the two states. In an increasingly polarized environment, the conflict is reviving due to the mutual distrust. The option that Pakistan has is to make the right choices to minimize the economic shocks. The mistakes made during the Ukraine war, such as providing subsidies and an overvalued exchange rate for political gains, must be avoided. The crises will prove decisive: the right or wrong choices at this critical time will decide the fate of Pakistan’s economic growth during the coming months.