Oil exports from the Gulf are recovering, but dangerous shipping routes and high energy costs continue to test Pakistan’s foreign exchange reserves.

At a petrol pump in Karachi, the price on the display can change because of an attack on a tanker hundreds of kilometres away in the Persian Gulf.

The connection runs through Pakistan’s import payments. Oil companies purchase fuel in international markets, pay freight charges and arrange marine insurance. Importers then need foreign currency to settle their bills.

When shipping becomes dangerous, the cost of bringing petroleum into Pakistan can rise even if sufficient oil remains available.

The Strait of Hormuz crisis has exposed that weakness again. Pakistan has rebuilt part of its foreign exchange reserves and regained access to international bond markets. But it still depends heavily on imported energy.

The immediate question is how much of the additional cost the economy can absorb without placing fresh pressure on the rupee and household budgets.

Gulf Oil Exports Are Recovering. Hormuz Is Still Dangerous.

The Strait of Hormuz connects the Persian Gulf with the Gulf of Oman. It carries oil and LNG exports from some of the world’s largest energy producers.

Before the present conflict, approximately 20.9 million barrels of petroleum liquids passed through the strait each day during the first half of 2025, according to the US Energy Information Administration.

The war that began in February 2026 severely disrupted maritime traffic.

By October, regional oil exports had recovered substantially. Reuters reported on October 22 that Middle Eastern exports had risen above pre-war levels.

Yet that recovery tells only part of the story.

Saudi Arabia has diverted oil through its East-West pipeline to the Red Sea port of Yanbu. Other exporters have changed shipping arrangements to maintain deliveries.

Direct traffic through Hormuz remains below earlier levels, and attacks on vessels continue.

Reuters reported that tanker charter rates on some Middle Eastern routes remained exceptionally high. Marine insurance costs have also risen sharply.

For an importer, these costs matter as much as the availability of crude oil.

A shipment may arrive on schedule and still cost considerably more than it would have before the conflict.

Pakistan’s Petroleum Bill Shows the Scale of the Risk

Pakistan imported approximately $16.86 billion worth of petroleum-group products during FY2025–26, according to Pakistan Bureau of Statistics figures.

That represented a 5.76% increase over the previous financial year.

Crude oil imports accounted for approximately $7.17 billion. Petroleum products added $6.39 billion, while LNG imports were approximately $2.22 billion.

These are not small figures for a country that must continually earn or borrow foreign currency to finance imports.

The pressure became more visible during the conflict.

According to reporting based on official trade data, Pakistan’s petroleum-group imports during March–July 2026 were approximately $1.3 billion higher than during the corresponding months of 2025.

International prices were an important factor, but changes in import volumes and purchasing patterns also affect the bill.

Pakistan’s own Economic Survey explains that higher crude prices have historically increased the country’s import payments. It also warns that the effect depends on quantities purchased and the timing of transactions.

A rise in the oil bill does not automatically produce an equal decline in reserves.

Exports, remittances and financial inflows can offset part of the additional demand for dollars.

The problem emerges when foreign currency payments begin to outpace available inflows.

Why the Exchange Rate Matters

Pakistan pays for most imported petroleum in foreign currency.

When the cost of those imports rises, companies need more dollars unless they reduce purchases or obtain more favourable payment arrangements.

If the additional demand for dollars is not matched by foreign currency inflows, the rupee can come under pressure.

Depreciation creates another problem. Even if the international dollar price of oil stops rising, a weaker rupee can increase its domestic cost.

Petroleum prices at Pakistani filling stations do not follow crude oil prices mechanically.

Government levies, exchange rates and pricing decisions influence the final amount consumers pay.

An international price increase may therefore appear gradually in domestic transport costs.

For businesses, the effects can arrive through freight bills before they become visible in retail prices.

LNG Creates a Different Financial Problem

Pakistan’s electricity system has become less dependent on imported LNG than it was in some earlier years.

Power generation from regasified LNG fell from approximately 22,231 GWh in FY2024–25 to 17,130 GWh in FY2025–26.

Hydropower and nuclear generation remain major sources of electricity. Coal also contributes substantially.

But falling LNG generation does not eliminate the financial risks associated with imported gas.

Pakistan has long-term LNG purchasing commitments. Some gas-fired power plants also carry contractual capacity-payment obligations.

The Pakistan Institute of Development Economics has highlighted the financial risks that arise when LNG demand falls while contractual commitments remain.

A disruption can therefore affect the economy in two ways.

Higher LNG prices can increase the cost of imported gas. At the same time, contractual obligations may remain even when electricity demand or gas-fired generation declines.

The consequences depend on contract terms, available substitutes and government decisions.

Pakistan’s power-sector circular debt makes the problem harder to manage.

Delaying legitimate cost recovery can weaken energy suppliers. Passing every increase directly to consumers can create affordability problems and further reduce industrial demand.

The State Bank Has Built a Larger Reserve Buffer

Pakistan’s foreign exchange position is stronger than it was during some earlier balance-of-payments crises.

The State Bank of Pakistan held approximately $21.47 billion in foreign exchange reserves on October 9, 2026.

Commercial banks held another $5.39 billion, bringing total liquid foreign exchange reserves to approximately $26.86 billion.

These figures provide a measure of reassurance, but they require careful interpretation.

Foreign exchange reserves are not simply spare money available for unlimited spending.

The country must continue meeting external debt obligations and paying for essential imports. Its banks and businesses also need access to foreign currency for normal transactions.

The SBP’s policy rate stood at 11.5% in October, ahead of its scheduled October 26 monetary policy meeting.

Pakistan’s headline inflation was approximately 10.3% in September, according to the IMF.

The central bank faces a difficult problem when imported energy becomes more expensive.

Higher interest rates can restrain demand and help contain inflation expectations. They cannot reopen a shipping route or reduce tanker insurance premiums.

Exchange-rate flexibility offers another means of adjustment, although depreciation raises the rupee cost of imports.

The SBP must therefore manage inflation and external stability without treating its reserves as an unlimited defence against international prices.

IMF Financing Helps, but It Cannot Remove the Energy Risk

Pakistan’s IMF programme provides financial support during a period of considerable external uncertainty.

On October 7, IMF staff reached agreement on the fourth review of the Extended Fund Facility and the third review of the Resilience and Sustainability Facility.

Subject to Executive Board approval, Pakistan would gain access to approximately $1.21 billion in additional financing.

The money should not be counted as disbursed until the required approval is completed.

Pakistan has also returned to international bond markets.

In September 2026, the government issued a $3 billion dual-tranche Eurobond. The Finance Ministry subsequently confirmed the transaction.

Market access gives Pakistan another source of financing. It also creates future interest and repayment obligations.

Neither IMF financing nor bond issuance directly reduces the country’s need to import petroleum.

They help manage financing requirements while the government works on the more difficult task of reducing external dependence.

The IMF has also called for exchange-rate flexibility and continued energy-sector reforms. It has emphasised targeted protection for vulnerable households rather than broad, expensive fuel subsidies.

These recommendations become harder to implement when energy prices rise and household incomes remain under strain.

What Higher Energy Costs Mean for Households

Diesel prices matter to people who never own a vehicle.

Trucks carry food from agricultural markets to cities. Transport companies move imported goods from Karachi’s ports to warehouses and factories.

When fuel becomes more expensive, businesses may increase their charges to recover part of the additional cost.

The effect is rarely uniform.

A vegetable trader may face higher transport charges while market prices also respond to harvest conditions. A factory may absorb some energy costs temporarily to retain customers.

Households with limited incomes have fewer options.

A family that spends much of its monthly budget on food and transport cannot easily reduce those expenses without changing its daily routine.

The government faces a similar constraint on a larger scale.

Keeping fuel prices artificially low through broad subsidies can protect consumers temporarily, but it may increase fiscal costs. Allowing prices to adjust reduces that burden while exposing households to international volatility.

Targeted support can help poorer families without subsidising fuel consumption across the entire economy.

Strategic Reserves Are Useful, but They Have a Price

Pakistan has considered expanding petroleum storage arrangements following the disruption in the Gulf.

Larger inventories could provide additional time to respond when shipments are delayed.

But storage is not free.

Fuel must be purchased in advance, and storage facilities require maintenance. Companies holding larger stocks also tie up money that could otherwise finance daily operations.

The country needs to decide how much additional security justifies those costs.

Diversifying suppliers can help, but buying oil from a different country does not necessarily remove the maritime risk.

Cargoes from several Gulf producers still depend on the same shipping routes.

Renewable electricity offers a longer-term means of reducing some imported fuel requirements.

Solar generation can replace part of the electricity that would otherwise come from fossil fuels. It cannot immediately replace diesel used in road freight or eliminate the need for imported aviation fuel.

Pakistan also needs dependable transmission networks and investment in electricity-system flexibility.

The practical objective is not complete independence from international energy markets. Few modern economies can achieve that.

It is to reduce the damage that a disruption in one shipping corridor can cause.

The Economic Test Will Continue After Shipping Recovers

Pakistan has larger foreign exchange reserves than it held during some previous crises. Its IMF programme remains in place, and the government has regained access to international borrowing.

Those improvements matter.

They give economic managers more options when energy prices rise or foreign currency payments increase.

But financial buffers cannot permanently compensate for an expensive import structure.

A tanker can reach Karachi without interruption while its freight and insurance charges still raise the cost of the fuel it carries.

The government must then decide how much of that cost consumers should bear, how much businesses can absorb and whether public finances can support temporary relief.

Pakistan cannot control the security situation in the Strait of Hormuz.

It can, however, reduce its exposure over time through better fuel planning and more efficient energy use. Diversified supply arrangements would provide another layer of protection.

Until those changes take hold, events in the Gulf will continue to influence prices far beyond the region.

A family boarding a bus in Karachi may never hear about the insurance premium paid on an oil tanker. Part of that cost can still reach its monthly budget.

Sources and further reading

• Reuters, October 22: Don’t mistake Mideast oil rebound for normality
• IMF, October 7: Pakistan EFF and RSF staff-level agreement
• State Bank of Pakistan: official reserve and policy data
• Pakistan Bureau of Statistics: external trade data
• Reuters: Pakistan petroleum storage plans