Middle East tensions threaten Pakistan’s fragile economic stability

Pakistanrsquos recent signs of economic stability are now under fresh pressure as rising tensions in the Middle East threaten to disrupt its fragile recovery a report has said The escalation involving the United States Israel and Iran has raised concerns over the countryrsquos heavy dependence on the Gulf region for energy remittances and financial support according to The News International report reported IANSIn recent months Pakistan had shown improvement in key economic indicators such as easing inflation rising foreign exchange reserves a stable currency and even a current account surplus after nearly a decadeHowever the ongoing crisis in the Persian Gulf has cast doubt on how long this progress can last the report saidGulf crisis threatens Pakistans oil supply through Strait of HormuzAs per IANS a major concern is Pakistanrsquos dependence on oil imports through the Strait of Hormuz Around 81 per cent of the countryrsquos oil imports pass through this routeAny disruption in this narrow shipping lane can immediately affect supplies and increase costsThe impact of rising oil prices is already being felt Brent crude prices which were around 70 per barrel before the conflict surged to over 100 within daysFor a country like Pakistan which imports most of its energy needs such a spike directly increases the import bill and puts pressure on foreign exchange reservesApart from energy remittances form another key pillar of Pakistanrsquos economy In FY2025 the country received about 383 billion in remittances with more than half coming from Gulf nationsSaudi Arabia and the United Arab Emirates together accounted for a large share of these inflowsPakistani workers in Gulf fear layoffs as economic crisis deepensHowever the current crisis could also affect these inflows Economic slowdown in Gulf countries may impact sectors like construction and services where a large number of Pakistani workers are employedMany of these workers are in low or semiskilled jobs making them more vulnerable to layoffs during economic uncertainty reported IANSReduced incomes and higher living costs could limit their ability to send money back homePakistanrsquos economic ties with Gulf countries go beyond trade and remittances Nations like Saudi Arabia and the UAE have historically supported Pakistan during financial crises through deposits and deferred oil payment facilities But regional instability may reduce the chances of such assistance in the near termExperts warn that Pakistanrsquos economic structure remains highly dependent on external factorsWhile recent stability has been achieved it is largely driven by shortterm measures rather than deep structural reformsThis makes the economy vulnerable to global shocks such as rising oil prices and geopolitical tensionsLooking ahead analysts suggest that Pakistan needs to diversify its energy sources and reduce reliance on imported fuelIncreasing the use of renewable energy and expanding alternative supply routes could help lower risks as per IANSAt the same time improving the skills of its workforce may make remittance flows more stable during global downturnsInputs from IANS