Page 23 - CMA Journal (Mar-Apr 2026)

As the United States (US) and Iran negotiate for an crisis. Additionally, with
agreement on the opening of the Strait of Hormuz, the supply chains likely to
effectiveness of policies that can avert a long-term crisis from suffer, especially in the
oil shocks becomes increasingly important. The failure to agriculture and food
reach an agreement in mid-April after the Islamabad Talks sector as transportation
has created signi cant challenges for policymakers around costs and input costs that
the world as they devise strategies to absorb the costs of feed on fuel prices rise,
increasing uncertainties as one of the most crucial water low-income countries are
passageways, in terms of its importance to global oil and gas likely to face mounting
trade, remains blocked to super oil tankers. However, several threats to their food
opportunities arise for Pakistan if the challenges prevail in security. Therefore, the
the Persian Gulf. rising oil prices are not
only likely to create
Before the blockage imposed by Iran on 28th February 2026, challenges in terms of the Dr. Aadil Nakhoda
more than 20 million barrels of oil transited the Strait of Faculty member at the Institute
availability and prices of
Hormuz daily, which contributed to 25 percent of global fuel, the spillovers into of Business Administration
seaborne oil trade and 20 percent of global petroleum several other sectors are (IBA) and Chairman of the
consumption as reported by UN Trade and Development. Economic Advisory Group
likely to adversely impact
Approximately 20 percent of global LNG supply and 15 growth and development (EAG)
percent of re ned petroleum products transited through in low-income countries
this strait. The Strait of Hormuz also sees a signi cant
that are particularly reliant on fuel imports.
proportion of fertilizers, ammonia and sulphur transit
through the trade, especially through bulk transporters. The Pakistan as a net-energy importer faces signi cant
blockade has created signi cant disruptions in the oil and challenges as the uncertainty due to the war rages in the
gas trade, as re ected in price volatility throughout March region, blocking the shipment of crucial oil and fuel products
and April 2026. The price swung like a pendulum with the into the country. Pakistan imports approximately 80 percent
news on the opening and closing of the strait. of its total petroleum requirements, with 80% of its crude oil
imports and almost all of its LNG imports transit through the
The Brent crude oil surpassed $120 per barrel as hostilities in
Strait of Hormuz. Pakistan imported $10 billion worth of
the region raged, falling below $100 per barrel on days when
petroleum products in the rst eight months of FY26, which
the opening seemed likely. However, several re neries in the included $3.7 billion worth of petroleum products and $3.8
region that have contributed to the production of various oil
billion worth of petroleum crude. Although, both products
products have been forced shut. While global supply has
reported a decline in import value of 6 percent year-on-year,
plunged by 8 million barrels a day, by the International they reported an increase in quantity terms of 3.7 percent
Energy Agency (IEA), the re ning capacity was reduced by
and 16.6 percent respectively highlighting the fall in oil
more than 3 million barrels a day due to attacks on the oil prices during the course of the year. Further, Pakistan also
facilities in the region. This has also resulted in a shortage of reported a 26 percent decline in the import value of LNG and
feedstock, which is critical for several allied industries that
4 percent decline in the import of LPG, signifying the drop in
depend on fuel products to produce their output.
demand for the aforementioned products even before the
start of the regional war. The supply line of crucial petroleum
The International Monetary Fund at the end of March 2026
products for Pakistan is choked with the blockage of the
reported that the closure of the strait was similar to a large
tax on income for the residents of oil importing countries. Strait of Hormuz, which can have signi cant implications for
Further, such economies would likely face increasing scal the fragile economy.
burden and rising challenges on their external accounts. However, the current account surplus reported in March
Higher fuel costs and electricity bills are likely to erode the 2026 is primarily due to fall in imports of petroleum products
purchasing power of households, while the policymakers as they decreased from $1.2 billion in February 2026 to $980
will be burdened by increasing risk of a balance-of-payment million in March 2026. This provides a breathing room for the

ICMA’s Chartered Management Accountant, Mar-Apr 2026 21