The conflict between the United States and Iran has triggered a severe energy price shock across Pakistan's already fragile economy, compounding rising inflation, dwindling foreign exchange reserves, and a fast-depreciating currency, according to an analysis published in India Narrative. Analysts describe Pakistan as the "primary casualty" in the subcontinent of the US-Iran war.

The Oil Bill Shock

Pakistan's weekly petroleum import bill has surged 167 percent — from $300 million to $800 million — as benchmark Brent crude surpassed $112 per barrel. The closure of the Strait of Hormuz has driven freight costs and insurance premiums to historic highs, amplifying the crisis beyond the crude price itself.

In April 2026, Prime Minister Shehbaz Sharif publicly confirmed the scale of the petroleum bill increase. On an annualised basis, this translates to an additional burden of approximately $26 billion — a figure that nearly matches Pakistan's entire FY2025 merchandise export earnings of $29.8 billion. In effect, Pakistan is generating an import liability equal to its entire export sector in a single commodity category, during a period of acute reserve stress.

A Structural Vulnerability, Not a Transient Shock

The India Narrative analysis argues this is not merely a temporary disruption but a structural blow to one of South Asia's most fragile economies. Between 85 and 90 percent of Pakistan's petroleum requirements are met through imports, predominantly from Gulf states whose export logistics depend entirely on unimpeded Hormuz transit. The country has no comparable alternative supply option and no functioning strategic petroleum reserve.

This structural dependence creates what economists term a high pass-through environment: international oil price increases transmit rapidly and comprehensively into domestic fuel prices, transport costs, electricity tariffs, and consumer prices. The International Monetary Fund (IMF) estimates Pakistan's CPI elasticity to oil at 0.4–0.6 percent per 10 percent price increase — among the highest in South Asia.

Cascading Macroeconomic Impact

According to the analysis, the energy shock transmits across Pakistan's macroeconomy, leading to "accelerating inflation, current account deterioration, foreign exchange reserve depletion, currency depreciation, and a growing logistics crisis at Karachi port." The article notes that these vulnerabilities predate the current crisis by decades, making recovery significantly harder.

"Pakistan's incremental annual oil burden now approaches its total export earnings. This is not a price adjustment — it is a stress event of structural proportions, exposing vulnerabilities that predate the current crisis by decades," the India Narrative article states.

What Comes Next

With no strategic petroleum reserve and no viable alternative import route, Pakistan's fiscal and monetary authorities face limited tools to absorb the shock. Any prolonged closure of the Strait of Hormuz, or further escalation in US-Iran hostilities, risks pushing Pakistan's already stressed balance of payments into a deeper crisis. How Islamabad navigates its IMF programme commitments amid this external shock will be closely watched in the weeks ahead.