Middle East tensions ripple through Pakistan’s fragile economy: Fuel cost soars, household bills pile up and more

The Middle East crisis is sending shockwaves far beyond the region, unsettling everything from oil markets to stocks and currencies. At a time when markets around the world are already volatile, Pakistan, which is already grappling with a fragile economy, is finding itself on the brink of an economic crisis. Concerns are rising around inflation, energy security and social stability continue to rise, putting the economy under visible strain.Experts warn that the fallout from the ongoing conflict involving Iran, Israel and the United States could deepen Pakistan’s existing vulnerabilities, especially given its heavy reliance on energy imports. The impact is no longer limited to markets, it is beginning to show in everyday life, from travel costs to education and household expenses.

The energy shock

International oil prices have surged sharply as Iran tightened its grip over the strategically important Strait of Hormuz, sending fresh tremors through global fuel markets. With a large share of the world’s oil supply passing through this narrow corridor, even minor disruptions have unsettled supply chains.For Pakistan, the impact has been immediate.The disruption has pushed up the cost of liquefied natural gas (LNG), a key fuel for power generation and industry. Shipments that cost around $25 million just weeks ago are now reportedly exceeding $100 million due to supply shortages and uncertainty, The Express Tribune reported.Qatar, a major LNG supplier to Pakistan, has declared force majeure following production disruptions. At the same time, global suppliers, including Shell, have also declared force majeure on contracts linked to Qatari supplies.

Rising fuel costs and inflation risks

The global energy shock is now spilling into daily household bills. Earlier this week, the Pakistan government approved a steep increase in the levy on high-octane fuel, raising it by PKR 200 per litre, from PKR 100 to PKR 300, according to ARY News.This comes after a March 6 hike, when petrol and diesel prices were raised by PKR 55 per litre amid rising global oil prices driven by the US-Israel war with Iran. Petrol now costs PKR 321.17 per litre, up from PKR 266.17, while diesel has risen to PKR 335.86 from PKR 280.86.Since fuel is the backbone of transportation, logistics and manufacturing, the increase is expected to push inflation higher.Senior Karachi-based journalist Shams Kerio warned that Pakistan’s dependence on regional trade and oil imports makes it particularly vulnerable. He noted that prolonged disruptions, especially if negotiations between Iran and the United States fail, could worsen economic instability.

Strain on aviation sector

The aviation sector is also feeling the pressure.Fuel costs have surged, with Jet A-1 prices rising by around PKR 154 per litre and aviation gasoline by nearly PKR 80 per litre, according to The Express Tribune. Airlines are struggling to manage rising costs and have passed much of the burden on to passengers leading to high airfares during Eid ul-Fitr. Domestic fares increased by 15% to 20%, with some passengers paying up to 30% more. Ticket prices for domestic routes have jumped by PKR 10,000 to PKR 15,000, while international fares have surged between PKR 30,000 and PKR 150,000 depending on routes and demand.Further increases may be unavoidable if the situation persists.

Pressure on government finances and reserves

The crisis is also exposing deeper economic weaknesses, including limited reserves and high government spending.Kerio stressed the need for tighter fiscal management, warning that prolonged conflict could have severe consequences. “If the war continues, Pakistan’s economy could collapse due to lack of reserves and weak financial accountability,” he said, adding that ordinary citizens would bear the brunt.The government has begun taking precautionary steps. Prime Minister Shehbaz Sharif chaired a meeting to review fuel reserves and supply, with officials stating that there are “adequate stocks of petroleum products” for now.However, authorities warned that the unstable regional situation could disrupt supplies, prompting austerity measures.

Impact spills into daily life

To manage the crisis, the government has introduced strict fuel-saving measures.These include a 50% cut in fuel allowances for official vehicles, a four-day work week, and a directive for half of public sector employees to work from home, except those in essential services.Citizens have been urged to conserve fuel to “avert the risk of petroleum products’ supply getting affected in the coming days”, with suggestions such as carpooling and limiting unnecessary travel.Sharif has also called for a “comprehensive strategy” to handle any emergency, while the Intelligence Bureau has been tasked with monitoring the implementation of these measures.

Impact on vulnerable populations

The burden is expected to fall hardest on lower-income groups.Kerio noted that daily wage workers are already under pressure and warned that rising fuel prices could worsen food insecurity and unemployment. “Daily wage workers are already struggling. If petrol prices rise further, food insecurity and unemployment will worsen,” he said.Higher fuel costs are also increasing expenses in agriculture and industry, which is likely to push up prices of essential goods, including food and household items.

More pressure on an already fragile backbone

The crisis comes at a time when Pakistan is already dealing with deep structural challenges, including gaps in education.Nearly 28% of children aged 5-16 remain out of school, with girls disproportionately affected. The literacy rate stands at 63%, with clear gaps between urban and rural areas, and between men and women.Experts say financial pressures, household responsibilities and limited access to secondary education continue to drive high dropout rates, especially among girls.These long-standing issues reduce the country’s ability to absorb economic shocks and sustain growth.

External support and uncertain outlook

Amid the crisis, the Asian Development Bank is expected to provide about $10 billion in financing over the next five years under its 2026–30 strategy.ADB Country Director Emma Fan said, “The new CPS is tailored to address Pakistan’s structural challenges and promote robust and lasting growth, which benefits the whole country, especially the poor and vulnerable.”While this may offer some support, uncertainty remains high.Kerio warned that the conflict could escalate further, potentially drawing in countries like Russia and China. At the same time, he expressed cautious optimism. “If negotiations succeed and the war ends, there is a chance for gradual recovery,” he said.He stressed that dialogue remains key. “Issues can only be resolved through dialogue, not conflict,” he said, adding, “Peace is possible only with sincerity, trust and a commitment to dialogue.”