Karachi – June 20, 2025: In response to escalating regional tensions, the Institute of Cost and Management Accountants of Pakistan (ICMAP) has issued a timely and policy-focused assessment of the potential economic fallout from the ongoing Israel–Iran conflict. Developed by ICMAP’s Research and Publications Department, the report complements the government’s recent decision to establish a high-level committee—chaired by the Finance Minister—to evaluate emerging economic risks.
ICMAP’s assessment underscores that while the conflict remains geographically limited, its indirect economic consequences are already rippling across global markets, particularly affecting energy, trade, and financial systems. For Pakistan, the exposure is significant due to its dependence on imported fuel, critical maritime trade routes through the Gulf, and the livelihoods of over four million expatriate workers based in the Middle East.
Central to the analysis is a warning that any disruption in the Strait of Hormuz—through which nearly 20% of global oil and LNG transit—could drive oil prices to between $100 and $130 per barrel. This would substantially increase Pakistan’s energy import bill, elevate power generation costs, and accelerate inflation. Domestic diesel prices could rise by more than 30%, with wide-ranging effects on food production, transportation, and household expenditures.
The report further highlights rising risks to financial stability. Depreciation of the Pakistani Rupee, increased external debt servicing costs, and fiscal pressure from potential fuel subsidies could erode macroeconomic resilience. Exporters are already facing sharp increases in shipping insurance premiums, reportedly climbing from $400 to $2,000 per container, thereby undermining export competitiveness. In addition, supply chain disruptions and elevated freight charges are expected to impact industrial production—particularly in key sectors such as textiles, chemicals, and edible oils.
To address these challenges, ICMAP has outlined a set of strategic policy recommendations. At the forefront is the proposal to establish a Strategic Economic Task Force comprising the Ministry of Finance, Ministry of Commerce, Ministry of Energy (Petroleum Division), Ministry of Foreign Affairs, Ministry of Planning, Development and Special Initiatives, Ministry of Defence, and the State Bank of Pakistan. This high-level task force would be responsible for monitoring global developments and coordinating timely, cross-institutional policy responses to safeguard Pakistan’s economic stability.
The Institute also recommends expanding Pakistan’s strategic petroleum reserves from the current 21 days to at least 90 days of national demand. This critical buffer could be financed through sovereign Sukuk, modeled after successful international practices, to enhance energy security and reduce vulnerability to global supply shocks.
Additional recommendations include the adoption of Shariah-compliant oil price hedging instruments for up to 30% of imports to manage exposure to international price volatility. ICMAP also advocates diversifying oil procurement by pursuing local currency trade agreements with countries such as Russia, Iran, and China. Accelerating the modernization of local oil refineries is also advised, which could reduce reliance on imported refined fuels and potentially save up to $1 billion annually.
ICMA further recommends for reversing recent taxes on solar panel imports and fast-tracking the implementation of the 10,000 MW Solar Initiative to promote clean energy and enhance long-term energy resilience.
On the external front, it emphasizes the need to safeguard overseas remittances by engaging Gulf countries, incentivizing formal remittance channels, and supporting returning workers to sustain household incomes and foreign exchange inflows.
ICMAP further suggests applying for financing under the IMF’s Resilience and Sustainability Trust (RST) and establishing an Energy Shock Stabilization Fund in collaboration with multilateral development partners to strengthen fiscal buffers.
In conclusion, ICMAP cautions that although the Israel–Iran conflict remains militarily contained, its broader economic implications—especially through oil price shocks, trade disruptions, inflation, and rising insurance costs—could significantly impact Pakistan’s economic outlook. The Institute stresses that only a proactive, well-coordinated, and forward-looking policy response can ensure economic stability and preparedness in these uncertain times.
