Gulf Crisis Exposes Economic Vulnerability: Nadeem M Qureshi May 11, 2026 | 4 min read
Iran renewed attacks on the United Arab Emirates (UAE) have halted oil loading at Fujairah port after three consecutive days of strikes. This has sent global crude prices soaring and exposed Pakistan’s economic model as unsustainable.
Pakistan imports about $18-20 billion worth of petroleum products annually, making it highly vulnerable to any disruptions in oil supplies. Every $5 increase in global crude prices adds nearly $1 billion to the import bill. For a country already grappling with a fragile current account, such shocks are particularly damaging.
Oil is the backbone of Pakistan’s inflation cycle. A $10 per barrel rise can add nearly a full percentage point to inflation. This affects transport costs, electricity tariffs, manufacturing and food prices for millions of households struggling under record-high prices.
The immediate challenge is to prevent the oil shock from escalating into a broader economic crisis. However, Pakistan must avoid the temptation of blanket subsidies - a politically attractive but fiscally disastrous response. Instead, targeted relief measures such as digital cash transfers through BISP or mobile wallets can cushion low-income households without distorting fuel prices for the economy.
Energy conservation is another underused tool. Early market closures and mandatory energy-efficient lighting may sound symbolic, but they can save millions annually on imports. A 5% reduction in national fuel consumption translates into hundreds of millions of dollars saved.
Pakistan must also leverage its relationships with Saudi Arabia, the UAE and Qatar for structured support such as deferred payment arrangements or flexible LNG scheduling. These mechanisms have helped in past crises and could provide breathing room again.
The IMF programme underway is crucial. A stable exchange rate is the first line of defense against imported inflation. Without it, every other measure becomes harder.
While short-term measures can soften the blow, they do not address the underlying problem. Pakistan’s vulnerability remains structural. To build a sustainable future, the country must accelerate the shift to renewable energy, expand domestic refining capacity, electrify transport and fix its power sector.
A 50% target for renewables by 2030 is ambitious but achievable - essential for reducing import bills and stabilizing electricity prices. Upgrading refineries would improve energy security and reduce reliance on imported refined products, creating industrial capacity and jobs. A national petroleum reserve could cushion future price shocks and strengthen bargaining power.
This moment of reckoning underscores the need for political will, policy continuity and a shift in national priorities. Pakistan must move towards renewable energy, expand domestic refining, electrify transport and fix its power sector to secure its economic stability.
