Conflict in the Neighborhood

Pakistan is facing severe economic and security pressure: the Middle East war drives up oil prices, strain in Afghan border, and vulnerabilities of Pakistan's reliance on Gulf allies. Pakistan is among the most exposed economies because it imports most of its oil from the Gulf, while its economy is already under International Monetary Fund stabilization. Energy analysts say attacks on oil infrastructure and shipping risks in the Gulf have effectively removed around 15 million barrels of crude oil and nearly 5 million barrels of refined petroleum products from global markets each day, intensifying fears of shortages. The crisis has also forced the shutdown of about 1.9 million barrels per day of refining capacity in the region, further tightening fuel supplies.

Pakistan is grappling with a dual challenge as the Iran-linked Middle East war hits both its economy and security. Rising global oil prices, border instability, and militant activity are compounding existing vulnerabilities, leaving the country under significant pressure. The country is navigating a period of heightened uncertainty with limited fiscal and security space.

For Pakistan, US-Israeli war, about which no one is sure as to how long will it drag on, brings a set of challenges which are not going to be easy to manage.