US-Iran War Escalation Could Be Pakistan’s Biggest Oil Shock, Warns Report

Analysts recalled the economic horror in initial days of the Russia-Ukraine war that gripped Pak when Brent crude hovered around $100-125 per barrel, leading the country close to sovereign default.

A similar surge in oil prices will cause the current account deficit to increase by roughly $1.5-$2 billion, the report cited former CEO of the Pakistan Business Council, Ehsan Malik.

Source : PTI

Show Quick Read

Key points generated by AI, verified by newsroom

If the war between Iran and the United States escalates, "the single biggest economic threat to Pakistan will come from oil," with surging prices likely to lift inflation and making tax cuts harder, a report has said.

The editorial piece from Dawn said inflation would rise again due to surging oil prices, making further policy rate cuts unlikely, and industry would face higher input costs, shrinking fiscal space and limiting the government’s ability to lower taxes or provide relief.

“For every $10 increase in oil prices, Pakistan’s inflation typically rises by about 0.5–0.6 percentage points,” the editorial cited an expert.

A similar surge in oil prices will cause the current account deficit to increase by roughly $1.5–$2 billion, the report cited former chief executive officer of the Pakistan Business Council, Ehsan Malik.

“If prices were to climb to $100, the deficit could expand by $5–$7 billion on an annualised basis, potentially undoing recent gains that allowed FY25 to post a $2 billion current account surplus,” Malik said.

Analysts recalled the economic horror in initial days of the Russia-Ukraine war that gripped Pakistan when Brent crude hovered around $100–125 per barrel, leading the country close to sovereign default.

"The war pushed up oil prices, widening Pakistan’s import bill and putting pressure on the exchange rate. The rupee dipped from around Rs 170 per dollar in early 2022 to a peak of Rs 305 on Aug 28, 2023, before stabilising in the Rs 270–280 range by end of that year," the editorial said.

Iran's retaliatory strikes on oil and gas facilities have heightened fears of supply disruption, lifting oil prices and stoking inflation worries. Tehran reportedly targeted oil and gas infrastructure in Saudi Arabia and threatened shipping in the strategic Strait of Hormuz.

(Disclaimer: This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)

Middle East Tensions Continue To Push Gold Prices Today (Mar 3), Check 22K & 24K Rates Per Gram In Major Cities

Silver Prices Remain Volatile Amid US-Iran Tension (Mar 3), Check 1 Gram And 1 Kg Rates In Major Cities Across India