Page 56 - CMA Journal (Mar-Apr 2026)

Author Co-Author

Mahwish Mehmood Muhammad Junaid Moeen
Inspector, Inland Revenue Department Software Engineer
Federal Board of Revenue (FBR)

The 2026 US-Iran military con ict and the Strait of Hormuz immediate strategic impact, the de facto closure of the Strait
blockade can be seen as a canonical exogenous energy of Hormuz, disrupted about 20 percent of global seaborne
supply shock which has asymmetric transmission impacts on crude oil ows in addition to signi cant LNG cargoes in the
emerging economies that rely on imports. The paper Gulf (Qadir, 2026). To Pakistan, the shock was existential and
presents a rigorous empirical analysis of the dual channel immediate, as over 80 percent of its primary energy needs
transmission mechanism involving the spread of the are met through imports.
geopolitical disruption in the energy economy of Pakistan,
The timing of the con ict enhanced its disruptive potential.
namely, in the dynamics of petrol prices and accentuating
Pakistan had just emerged from the shattering economic
circular debt in the power sector. Based on high frequency
crisis of 2022-2023, when the CPI was at an all-time high of 38
macroeconomic data, IMF and World Bank forecasts, and an
percent, foreign exchange reserves had fallen to less than
extensive review of the modern empirical evidence, the
USD 3 billion, and the rupee was trading at PKR 307 to the US
analysis demonstrates that the energy price shock served as
dollar (Tresmark, 2025). Signi cant scal consolidation and
the main channel through which the currency depreciated,
monetary tightening under the IMF Extended Fund Facility
in ationary pressures reemerged, and the deterioration of
allowed in ation to fall to 5.8 percent by January 2026, the
the external account was facilitated. Even though the April
current account to record its rst surplus in 14 years and the
2026 cease re, coordinated by Pakistan through diplomatic
rupee to be valued at around PKR 280 per US dollar (Mettis
negotiations, avoided disastrous tail-risk, the underlying
Global, 2026; Pasha, 2026). Yet, this stabilization remained
structural vulnerability of the energy economy has
fragile, dependent on crude oil prices staying below USD 80
essentially remained unchanged. In the case of the CMA
per barrel, uninterrupted Gulf remittance in ows and
community, the results highlight the urgency of
continued multilateral lender support.
systematizing enterprise-wide energy risk management
models and expedited implementation of indigenous The main research question is twofold: How did the 2026
renewable energy capacity. geopolitical shock transmit through Pakistan's energy
economy, and through which speci c channels? What
Introduction
particular weaknesses in the petrol pricing framework and
Geopolitical upheavals across the Persian Gulf on 28 power sector nancial framework ampli ed the domestic
February 2026 unleashed open hostilities, with United States impact? This investigation provides critical insight to CMA
and Israeli forces launching a coordinated attack on Iranian professionals on the nancial implications of geopolitical
nuclear and military installations (Hussain, 2026). Its risk.

ICMA’s Chartered Management Accountant, Mar-Apr 2026 54