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Pakistan faces prolonged inflation risk as oil prices surge amid Middle East tensions

By The South Asia Times

ISLAMABAD - Pakistan’s inflation could remain elevated if global oil prices continue to rise due to ongoing Middle East tensions, analysts have warned, Dawn reported.

According to a report by Topline Securities, inflation is projected to average 9–10 percent over the next year, with the possibility of exceeding 11 percent in the final quarter of FY26 if oil prices stay around $100 per barrel. A further increase to $120 per barrel could push annual inflation into double digits, raising the likelihood of additional interest rate hikes by the State Bank of Pakistan.

The report highlighted that Pakistan’s heavy reliance on imported energy—meeting about 85 percent of its needs—makes the economy particularly vulnerable to external shocks. Rising fuel costs are expected to slow economic growth, with GDP projections for FY27 revised down to 2.5–3 percent.

Key sectors including industry, agriculture, and services are also expected to face pressure, while the current account deficit could widen significantly if import controls are relaxed. Meanwhile, the Pakistan Stock Exchange has already seen notable declines amid global uncertainty.

Analysts said a sustained rise in oil prices, coupled with declining remittances and exports, could further strain Pakistan’s economic outlook, underscoring the need for careful policy management as the crisis unfolds.