ISLAMABAD: Despite tensions between Iran and Israel raising concerns of a global oil shock, analysts suggest that the macroeconomic impact remains limited for countries like Pakistan—at least in the short term.
The global energy landscape has shifted considerably, making Middle East oil less influential than in previous decades. For Pakistan, while rising oil prices will increase costs, the expected fallout remains within manageable limits.
Global Shifts Reduce Oil Shock Impact
Ali Meli, Chief Investment Officer at Monachil Capital Partners, highlighted the transformation in global energy dynamics:
“We live in a world where Middle East oil is a lot less relevant to the U.S.”
The shale revolution has turned the U.S. into a net oil exporter, and OPEC has increased production to maintain market stability. These factors have reduced the frequency and intensity of oil-related economic shocks.
Even with oil averaging $83 per barrel, global markets have shown resilience, and oil-importing economies like Pakistan are better positioned today to absorb short-term volatility.
Pakistan’s Exposure Manageable—For Now
If prices remain at current levels, Pakistan’s annual oil import bill may rise by approximately $400 million, according to rough estimates. However, this increase is marginal in the context of the country’s total import expenditures.
In terms of domestic inflation, the incremental effect is estimated at about 2%, assuming no significant secondary shocks or extended periods of elevated prices.
Analysts warn, however, that prolonged high oil prices—particularly above $90 per barrel—could strain Pakistan’s external account, push up transport and utility costs, and pressure the currency.
For now, the consensus is that while oil remains a geopolitical flashpoint, the economic fallout remains limited unless the conflict escalates dramatically or supply chains are disrupted over an extended period.
