ISLAMABAD: The conflict involving Iran and disruption to shipping through the Strait of Hormuz have significantly increased energy import costs across South Asia, adding pressure on Pakistan’s foreign exchange reserves, inflation and external account.
Pakistan’s petroleum import bill rose sharply in the months following the escalation of the Iran conflict, increasing from around $983 million in March 2026 to $1.28 billion in July, while peaking at nearly $1.91 billion in June, according to official trade data.
Cumulatively, Pakistan’s petroleum-group imports during March-July 2026 stood at approximately $7.7-$7.9 billion, compared with around $6.6 billion during the same period of 2025. This represents an increase of roughly $1.3 billion, or nearly 20 per cent, over the five-month period.
The sharpest year-on-year increase was recorded in April, when the petroleum import bill climbed to approximately $1.79 billion, compared with $1.35 billion a year earlier. The bill remained elevated in May before reaching around $1.91 billion in June, representing an increase of about 46pc year-on-year.
Import costs eased considerably in July, falling to around $1.28 billion from the June peak. However, the monthly decline was not enough to offset the substantial increase accumulated during the preceding months.
The energy shock has also pushed up Pakistan’s LNG costs. Petroleum-group imports in June included approximately $221.5 million worth of LNG, further increasing the country’s foreign-exchange requirements.
The disruption to energy flows through the Strait of Hormuz has raised not only crude oil and LNG prices but also freight, marine insurance and security costs, increasing the overall landed cost of imported energy.
The additional burden comes after Pakistan’s petroleum-group imports reached approximately $16.86 billion in FY2025-26, an increase of 5.76pc over the previous year. Crude oil imports alone rose by more than 31pc during the year.
Regional Energy Shock
The impact has extended across South Asia and other major energy-importing economies. According to Finland-based climate think tank Centre for Research on Energy and Clean Air (CREA), the US-Israel-Iran conflict increased the global oil and gas import bill by as much as $330 billion between March and August 2026.
Europe suffered the largest additional burden at around $78 billion, followed by China at $35 billion and India at approximately $22 billion.
India has faced a particularly significant impact because of its heavy dependence on imported crude. Its crude oil import bill surged 56.5pc to $63.4 billion during April-July 2026, despite broadly stable import volumes, as average crude prices increased sharply.
India’s imported crude price reached around $114.48 per barrel in April, compared with $67.70 a year earlier. Its oil import bill stood at approximately $13.7 billion in July alone, up about 41pc year-on-year.
With India importing around 88pc of its crude oil requirements, higher international prices and disruptions to Middle Eastern supply routes have placed considerable pressure on its merchandise trade balance.
Bangladesh has also experienced a substantial increase in energy costs. Bangladesh Bank data show that petroleum-goods imports more than doubled to $10.64 billion in FY2025-26, from $5.14 billion a year earlier. Crude petroleum imports increased by 92pc, while petroleum, oil and lubricant (POL) imports rose by 109pc.
The disruption has subsequently intensified Bangladesh’s LNG challenge. Petrobangla was forced to replace some planned long-term supplies with expensive spot cargoes, with 25 of 37 LNG cargoes scheduled for March-June sourced from the spot market at prices ranging between $20 and $28 per MMBtu.
CREA estimates that Asian LNG prices averaged around 75pc above pre-war expectations between March and August 2026. Bangladesh purchased 11 LNG cargoes for March-May at an average price of $21.35 per MMBtu, costing approximately $880 million—around twice pre-war price levels.
Dhaka has also sought alternative sources of refined petroleum from China, Singapore, Malaysia, Indonesia and India as conventional supply routes faced disruption. Bangladesh estimates that around 20-23pc of its imported fuel oil normally passes through the Strait of Hormuz, leaving the country vulnerable to a prolonged closure or disruption of the strategic waterway.
Pressure on Pakistan
For Pakistan, the additional $1.3 billion spent on petroleum imports during March-July represents a substantial foreign-exchange burden at a time when the country remains sensitive to external financing and reserve pressures.
Higher oil and LNG prices are also likely to feed into transportation, electricity and industrial costs, potentially adding to inflationary pressures and increasing production expenses across the economy.
The impact of the Hormuz crisis therefore extends well beyond the immediate security situation in the Middle East. For South Asian economies, prolonged disruption could translate into higher energy import bills, weaker external balances, increased inflation and additional pressure on foreign-exchange reserves.
The Strait of Hormuz has thus emerged not only as a geopolitical flashpoint but also as a major economic risk for energy-importing countries across the region.
Story by Khalid Mustafa
