Hormuz disruption could push oil to $120–$150, raise Pakistan’s import bill: study

Rising geopolitical tensions in the Middle East could drive global oil prices sharply higher, creating risks for Pakistan’s inflation outlook, external balance and economic stability, the Pakistan Institute of Development Economics (PIDE) has warned in the latest policy viewpoint.

PIDE said Pakistan remains vulnerable to global oil shocks due to its heavy reliance on imported petroleum and limited strategic reserves.

The study, written by Dr Abida Naurin, assistant professor and member of PIDE’s Macro Policy Lab, noted that tensions surrounding the Strait of Hormuz — a key maritime route that carries around 20% of global seaborne oil trade — have already pushed crude prices upward in early 2026.

According to the report, the escalation of the U.S.-Israel-Iran conflict has added a geopolitical risk premium to global energy markets, increasing volatility in oil prices.

The analysis warned that a worst-case scenario, such as a three-month disruption in the Strait of Hormuz, could push global oil prices to between $120 and $150 per barrel. Such a surge would significantly increase Pakistan’s monthly petroleum import bill and place upward pressure on consumer inflation, the study said.

Even moderate increases in oil prices could widen the current account deficit and add to macroeconomic pressures, it added.

The report also pointed to higher shipping insurance costs, freight charges and possible supply delays as factors that could raise import expenditures and strain foreign exchange reserves.

To manage these risks, PIDE recommended a mix of immediate and long-term policy responses.

In the short term, it suggested closer monitoring of petroleum stocks, diversification of import routes and suppliers, and consideration of oil hedging strategies to manage price volatility.

Over the longer term, the study recommended expanding strategic petroleum reserves, diversifying energy imports and increasing investment in renewable energy and energy efficiency.

According to the report, coordinated policy measures could help Pakistan manage global energy volatility while strengthening long-term energy security and macroeconomic resilience.