Study warns Middle East tensions could increase inflation risk for Pakistan

ISLAMABAD: A recent study by Professor Abida Naurin of the Pakistan Institute of Development Economics has cautioned that escalating geopolitical tensions in the Middle East may lead to a surge in global oil prices, posing a significant inflation risk for Pakistan.

The research highlights that ongoing conflicts in the region, particularly the Israel-Iran standoff, have the potential to disrupt oil supplies and drive up energy costs worldwide. According to the study, Pakistan, which relies heavily on imported oil, could face increased inflationary pressures if crude prices rise sharply as a result of these tensions.

The report notes that the Strait of Hormuz, a critical chokepoint for global oil shipments, has seen a decline in traffic due to the current geopolitical situation. This reduction in shipping activity is attributed to heightened security concerns amid the conflict, which has already impacted the movement of liquefied petroleum gas (LPG) tankers and other vessels.

Professor Naurin's analysis warns that any further escalation in the Middle East could exacerbate supply chain disruptions, leading to higher transportation and production costs for Pakistan. The study emphasizes the importance of monitoring developments in the region and preparing for potential economic challenges arising from increased energy prices.

The findings underscore the vulnerability of Pakistan's economy to external shocks, especially those related to energy imports. The report calls for policymakers to consider strategies to mitigate the impact of rising oil prices, including diversifying energy sources and strengthening domestic production capabilities.