Wars in the Middle East are fought with missiles and drones, but their economic shockwaves travel through global oil markets. The latest escalation involving Iran, the United States and Israel has once again demonstrated how quickly geopolitical tensions can destabilise energy markets.

For Pakistan, a country that imports nearly 85 per cent of its petroleum requirements, the consequences are immediate and profound.

Within days, international fuel benchmarks used in Pakistan’s pricing formula surged dramatically. The Platts averages used for the 1 March 2026 fuel price announcement were around $88 per barrel for diesel and $78 per barrel for petrol. By 6 March, those benchmarks had surged to roughly $149 and $106 per barrel, respectively, according to industry market data.

Such volatility is not simply a pricing issue. It is a test of economic discipline, policy credibility, and supply security.

Pakistan imports most of its crude oil from Gulf producers, with shipments passing through the strategic Strait of Hormuz, a maritime chokepoint through which roughly one-fifth of the world’s oil supply flows. Any disruption or perceived threat in this narrow passage instantly raises global prices, increases shipping insurance premiums, and adds uncertainty to supply chains.

For Pakistan, the immediate policy dilemma is familiar: should the government delay domestic price adjustments to shield consumers from rising fuel costs, or should it allow international price changes to pass through the domestic market in order to maintain supply stability?

The answer, though politically difficult, is increasingly clear.

Artificially suppressing fuel prices during global shocks creates fiscal liabilities that quickly evolve into circular debt. Pakistan learned this lesson painfully in 2022, when delayed price adjustments and large fuel subsidies contributed to severe macroeconomic instability and external financing pressures.

Timely price transmission is therefore not simply about balancing government accounts; it is also about maintaining confidence within the supply chain. Oil marketing companies and refineries must be assured that the expensive crude they import today will not become unsellable tomorrow because of politically frozen retail prices.

If that confidence erodes, imports slow, and that is precisely how shortages begin.

Pakistan must gradually develop strategic petroleum reserves capable of covering at least 60 to 90 days of imports, diversify crude supply sources, and pursue long-term contracts that reduce exposure to sudden market volatility

Pakistan must gradually develop strategic petroleum reserves capable of covering at least 60 to 90 days of imports, diversify crude supply sources, and pursue long-term contracts that reduce exposure to sudden market volatility

Pakistan’s vulnerability is compounded by its limited strategic fuel reserves. According to industry estimates, the country typically maintains around three weeks of petroleum product stocks across refineries and oil marketing companies.

By comparison, India has built dedicated strategic petroleum reserves at locations such as Visakhapatnam, Mangalore and Padur. These facilities allow India to maintain roughly 25 days of strategic crude reserves, in addition to commercial inventories held by refiners and marketers. This buffer gives policymakers more flexibility during global supply disruptions.

China maintains an even larger system of strategic petroleum reserves estimated to cover several months of imports, while also diversifying its supply through pipeline connections with Russia and Central Asia. These structural advantages significantly reduce Beijing’s vulnerability to maritime disruptions in the Middle East.

Pakistan has far less room for policy delay.

Another structural constraint lies within Pakistan’s refining sector itself. Many domestic refineries operate with older technology and limited complexity, which restricts their ability to process a wide variety of crude grades efficiently. As a result, Pakistan remains heavily dependent not only on crude imports but also on refined petroleum products, further increasing exposure to global market volatility.

The economic consequences of rising fuel prices inevitably reach ordinary citizens. Higher transport costs feed into food prices, logistics expenses, and overall inflation. For households already coping with economic pressures, such increases are deeply painful.

Yet shielding consumers from price signals entirely can ultimately make the crisis worse. When domestic fuel prices are artificially suppressed, demand often rises while imports decline, creating the perfect conditions for shortages, black markets, and panic buying.

Energy market stability during wartime volatility, therefore, depends on three essential principles: transparency, market-based pricing, and strict enforcement against hoarding.

When prices reflect international realities, speculative storage and panic purchasing decline. Inventory gains and losses are normal features of the oil business; attempting to eliminate them through price controls often pushes activity into informal markets instead.

At the same time, regulatory authorities must maintain strict oversight of depot inventories and supply chains to prevent hoarding and artificial scarcity.

Demand management must also become part of the national response. During major oil shocks, the cheapest barrel is the one not consumed. Temporary conservation measures such as reduced government transport usage, energy-efficient lighting policies, expanded public transport utilisation, and remote work arrangements where possible can meaningfully reduce the national import bill.

The deeper lesson from this crisis is the need for long-term resilience.

Pakistan must gradually develop strategic petroleum reserves capable of covering at least 60 to 90 days of imports, diversify crude supply sources, and pursue long-term contracts that reduce exposure to sudden market volatility. Exploring discounted crude opportunities from new suppliers, while maintaining balanced relations with traditional Gulf partners, could also strengthen supply security.

At the same time, accelerating investment in domestic energy sources such as hydropower, solar, and wind will remain essential for reducing long-term dependence on imported fuels.

Energy crises rarely end as quickly as they begin. Wars reshape markets and risk perceptions for months — sometimes years.

For Pakistan, the immediate priority must remain clear: maintain market confidence, ensure uninterrupted supply, and protect macroeconomic stability.

Shielding consumers from temporary pain may appear politically attractive, but history shows that delaying economic reality often makes the eventual cost far greater.

In times of global uncertainty, responsible policy requires difficult choices. And in energy markets during wartime volatility, indecision is not an option.

© The Friday Times