Pakistan may get inflation relief as oil prices fall after Strait of Hormuz reopens: report

The reopening of the Strait of Hormuz has eased pressure on global commodity markets, with oil and LNG prices falling after more than 100 days of conflict and disruption.

Brent crude has dropped to $73.84 per barrel, down more than 40% from its wartime peak of $115–120. US benchmark WTI is trading at $70.17 per barrel, UAE Murban at $67.24, Oman crude at $69.67 and Russia’s Urals benchmark at $64.42.

The decline is expected to ease inflationary pressure in energy-importing countries, including Pakistan. Economists estimate that lower fuel import costs and reduced pressure on the rupee and current account could bring Pakistan’s inflation down by 0.5–1.5 percentage points.

For Pakistan, every sustained $10 decline in oil prices can translate into hundreds of millions of dollars in annual import savings. A return of Brent to the $65–70 per barrel range could save the country several billion dollars compared with wartime price levels.

The Strait of Hormuz normally carries around 20 million barrels of oil per day, nearly one-fifth of global oil consumption, along with a major share of global liquefied natural gas exports. Its disruption had raised fears of the largest energy shock since the 1973 oil crisis.

Economists estimate that the 100-day crisis has already caused global losses of $500 billion to $900 billion. Had the disruption continued for another year, annualised losses could have reached around $2 trillion, while worst-case projections placed the possible damage at $3 trillion to $3.5 trillion.

LNG and gas markets have also eased. The Japan-Korea LNG benchmark has fallen to $15.74 per MMBtu, while European Dutch TTF natural gas is trading around €14.03 per megawatt-hour. US gasoline futures have dropped to $2.88 per gallon and heating oil prices to $3.13 per gallon.

The fall in prices reflects market confidence that Gulf energy exports will continue recovering. However, shipping and refining activity has not fully normalised.

Before the conflict, around 125 ships passed through the Strait of Hormuz each day. Current traffic remains below that level, while hundreds of merchant vessels are still delayed.

More than 100 loaded oil tankers carrying around 120 million barrels of crude are also working through the backlog created by the closure. Insurance premiums for Gulf shipping remain elevated, adding costs across the energy supply chain.

Refining capacity remains another constraint. More than 3 million barrels per day of Middle Eastern refining capacity was temporarily shut during the conflict, while around 1.9 million barrels per day is still offline.

Facilities in Saudi Arabia, Kuwait, the United Arab Emirates and Bahrain faced damage or operational disruption during the crisis.

Industry forecasts suggest refinery systems could recover to about 70 percent of normal capacity within six to eight weeks. Recovery to 90–95 percent is expected within 40–60 days, while near-full restoration may take three to six months. Complete logistical normalisation could extend into early 2027.

Most analysts now expect Brent crude to trade between $68 and $75 per barrel during late summer and autumn. If refinery repairs continue and shipping traffic normalises, Brent could return to the $65–70 range by the end of 2026.

Lower energy prices are also expected to reduce inflation in other major importing economies. Economists estimate oil prices near $65–70 per barrel could cut inflation by 0.1–0.2 percentage points in the United States, 0.1–0.3 points in the United Kingdom and 0.1–0.2 points in Japan.

India could see inflation fall by 0.2–0.4 percentage points, while its annual oil import savings could run into tens of billions of dollars.