Energy Disruptions & Price Pressures

The escalation of conflict in the Middle East since February 2026, following the USA-Israel coalition’s unwarranted and unprovoked attack on Iran, continues to intensify global inflationary pressures by disrupting energy supply chains, increasing transportation costs and weakening prospects for global economic recovery. The crisis has adversely affected both regional economic activity and international commodity markets, particularly energy and food supplies, at a time when many economies had only recently begun stabilising after earlier global shocks.

A key transmission channel of the ongoing inflationary wave has been the disruption of global energy trade. The Strait of Hormuz, through which nearly 25-30 percent of global oil trade and around 20 percent of liquefied natural gas (LNG) shipments pass, remains critically important for energy-importing economies in Asia and Europe. Supply uncertainties and transportation disruptions have quite obviously pushed up global oil and gas prices, raising fuel, electricity and industrial production costs across major manufacturing economies. Countries heavily dependent on imported fuel, particularly in Africa and Asia, including Pakistan, are facing mounting difficulties in securing energy supplies, even at substantially higher prices.

According to the World Economic Outlook and information from the International Monetary Fund (IMF), the persistent and worrisome situation in global oil markets, owing to the prolonged Middle East conflict threatening regional peace, security and stability, has wider economic consequences. Continuously fluctuating energy prices are feeding into global inflation through higher freight, fertiliser and food production costs. Increased transportation expenses and supply chain disruptions are also driving up prices of agricultural commodities and processed food items worldwide.

Low-income and energy-importing economies are particularly vulnerable, as higher import bills strain fiscal balances, weaken foreign exchange reserves and increase food security risks. Tighter global financial conditions and exchange rate pressures in several emerging economies are further amplifying imported inflation.

Regions across the Middle East, Africa, Asia-Pacific and Latin America are facing mounting pressure from rising energy, food and fertiliser prices, alongside tighter global financial conditions. Accordingly, energy commodity prices have been projected to rise by 19 percent in 2026, while oil prices are expected to increase by 21.4 percent, averaging around US$82 per barrel amid supply disruptions in the Middle East. Food prices are also projected to remain elevated due to higher energy, fertiliser and transportation costs.

Quite obviously, for Pakistan, these unpleasant, unexpected and unfortunate developments pose significant inflationary and macroeconomic risks. As a net importer of petroleum products, LNG, edible oil and industrial raw materials, Pakistan is particularly exposed to fluctuations in international commodity markets. Higher global prices have raised domestic fuel, electricity, transport and food costs, intensifying imported inflation and placing an additional burden on the people.

Rising import costs are also widening the trade deficit, increasing pressure on the external account and exchange rate stability, and adding to fiscal pressures in the energy sector during the remaining months of FY2026 and the coming months of FY2027.

It is worth mentioning that the incumbent federal coalition government, under the innovative and pro-people welfare-oriented leadership of Prime Minister Muhammad Shehbaz Sharif, has not only been concerned about these developments but has also been taking all possible appropriate measures to ensure the procurement of oil from friendly countries and other sources. These efforts are aimed at meeting the country’s pressing energy requirements in view of the ongoing Middle East conflict.

At the same time, the government is working on plans and initiatives to provide maximum possible relief to the people at large, particularly those directly affected by frequent fluctuations in international oil markets and the resulting increases in petroleum prices within the country.

Quite expectedly, the Prime Minister, while closely monitoring developments in the Middle East and the resulting volatility in international oil markets, responded to this difficult situation in a timely manner by announcing the launch of the PM’s Special Fuel Relief Scheme. The initiative has been presented as a targeted, practical and financially balanced measure to cushion vulnerable sections of society against rising fuel costs.

The scheme provides a subsidy of Rs100 per litre to eligible owners of motorcycles, rickshaws and small cars. Motorcycle and three-wheeler owners are entitled to the subsidy on a monthly quota of up to 20 litres, while owners of cars up to 800cc can receive relief on up to 30 litres per month.

Without going into further details, which have already been widely publicised and are being availed of by prospective beneficiaries throughout the country, it is worth mentioning that the implementation of the fuel relief scheme is being regularly monitored at the appropriate high level.

The public response has also been encouraging. More than eight million beneficiaries registered themselves within a fortnight of the launch of the fuel subsidy scheme on September 17, 2026, reflecting the pressing need for such relief among those struggling with rising transportation and household expenses.

Muhammad Zahid RifatThe writer is Lahore-based Freelance Journalist, Columnist and retired Deputy Controller (News), Radio Pakistan, Islamabad and can be reached at zahidriffat@gmail.com

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