Iran War is not confined within the Middle East, its aftershocks are traveling through oil tankers, fertilizer cargoes, shipping insurance, bond yields and supermarket shelves.
The Iran war is not yet over, it is shaping up as exactly that kind of shock: first energy, then food, and then ultimately higher finance cost. For a fragile importing economy like Pakistan, this is not a distant geopolitical drama. It is a direct threat multiplier.
Higher fuel cost – the foremost inflationary shock
The first tremor is higher fuel cost, consumers are being faced. State-owned PSO failed to secure any cargo through tendering at a time war begun, the government allowed huge price increase to OMCs to import costly oil to fill their tanks and inventories deficit, as stocks were left hardly for 10-days.
The IMF has already warned that a prolonged energy shock from the Iran war could fuel global inflation and dent growth. At time of writing this, Brent has surged near USD105 a barrel amid disrupted energy flows.
Emerging-market currencies have also come under pressure. India, one of the largest economies in the world, and largest staple producer and food exporter, failed to defend rupee, which has weakened by 3 percent since the Iran war begun.
The assumption of economic stability illusion
For Pakistan, which still lives with chronic external vulnerability, this is dangerous terrain. The State Bank of Pakistan projected the current account deficit in FY26 at just 0–1 percent of GDP under conditions of macroeconomic stability, and the policy rate was kept at 10.5 percent in January 2026, marking a continued pause in the easing cycle.
The decision aims to address rising uncertainty, specifically from Middle East tensions, increasing global fuel prices and inflation risks. Those assumptions now have become an illusion as imported fuel suddenly becomes far more expensive.
Vulnerable fragile import-dependent food security at high risk
The second tremor is fertilizer, and this may prove even more corrosive than oil. Around a third of global urea shipments move through the Strait of Hormuz, with urea prices surging sharply since the war began.
The disruption is broader than urea alone:n30-40 percent of global nitrogen fertilizer trade depends on the Hormuz, phosphate, potassium and ammonia flows are also under strain.
Pakistan primarily imports Di-Ammonium Phosphate (DAP), Nitrogen Phosphate Potassium (NPK) to fulfill agriculture needs. Due to insufficient local production, these imports bridge gaps in nitrogen-based urea and fulfill all potassic fertilizer demand.
Price hike and supplies disruption matter because fertilizer is the hidden bridge between war and food inflation. When fertilizer prices jump, crop costs rise in exporting countries; when crop costs rise, import-dependent countries pay the price later through higher food prices.
That is where Pakistan’s food-security fault lines become visible. Pakistan is not merely vulnerable to world food prices; it is exposed to the cost structures of the countries it depends on for food and farm inputs.
Australian farmers are facing both diesel stress and urea prices above USD 1,100 per ton. If Australian production costs rise, the price of food grains, oil seeds and other food exports hardens.
Canada too has moved to provide financial relief to farmers and agri-businesses hit by rising fertilizer and energy prices tied to the Iran war. That is a signal in itself: when major agricultural exporters start shielding their farmers from a war-linked cost shock, food-importing countries should start preparing for a food-import bill shock. Myanmar, Ethiopia, Tanzania, Kenya and other suppliers are not immune either.
Even where the direct fertilizer route differs, the same war-driven spikes in fuel, shipping, insurance and farm inputs lift cultivation and freight costs. The result is simple: food exporters will pass on cost inflation; food importers absorb it.
Pakistan’s food security is in double jeopardy; already dependent on imported agriculture inputs and farm produces such as pulses, soybean, canola edible oil seeds, and other essentials from Australia, Brazil, Canada, Malaysia, Indonesia and Myanmar, it is especially exposed to risk. Pakistan’s pulses import bill alone nears USD1 billion.
Recent downpours, thunderstorm have affected standing wheat crop in Punjab and yield may decrease by 20-30 maunds per acre and this will force country to import wheat once harvesting is fully completed.
SBP’s annual report for FY25 notes that food imports increased, led by higher imports of soybean, palm oil and pulses. Pakistan’s rising food import bill is alarming, surged by 18.41 percent to USD 6.41 billion during the first eight months (July–February) of 2025-26.
Current account imbalance & inflation risk
Current account surplus of USD 2.1 billion in FY2025 — a significant gain has already turned into deficit in FY2026. CA surplus of USD427 million in February 2026 quickly be eroded by a renewed commodity shock.
Then comes the third tremor: finance. Commodity shocks do not end at the port. They spill into inflation expectations, debt servicing, exchange-rate pressure and budget arithmetic.
Pakistan’s external buffers are better than they were during the 2023 panic, but they are not invincible. SBP’s reported foreign exchange reserves stood around USD 16.35 billion on 13 March 2026. That cushion is too because of increased home remittances particularly from Gulf countries and not because of sustained growth in exports, not a licence for complacency.
A sustained rise in oil, fertilizer and food prices would widen the import bill, tighten liquidity, and revive pressure on the rupee. It would also complicate monetary policy ahead just when inflation had started to moderate.
The way forward – out of the box smart solution
The gravest risk is that Pakistan repeats an old policy habit: fire-fighting policy, responding after the fire, not before the spark. Waiting for prices to fully transmit into domestic markets would be a strategic blunder. The state must move now on three fronts:
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Fuel must be prioritized. Pakistan should prepare a contingency plan that protects agriculture, freight, public transport, delivery riders, online cab, car and bike pooling and export industries before non-essential consumption. Rationing for non-commercial and luxury vehicles with zero subsidy and a complete ban on free petrol. A country short on dollars cannot behave like one flush with cheap energy.
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Fertilizer availability must become a national security issue. This means building precautionary stocks where feasible, zero tolerance for hoarding, black marketing profiteering, securing diversified supply contracts, and ensuring timely credit and distribution before Kharif crops sowing cycles are disrupted as these crops significantly contribute to our food security as well exports earnings.
Countries like India are scrambling to diversify fertilizer sourcing from Russia, Belarus and Morocco as Middle East supplies tighten and China has restricted exports. Pakistan cannot afford to arrive late to that queue.
- Food-security policy must shift from reactive public sector importing to mandatory private sector strategic stockpiles like Singapore builds through private stocks inventory instead of orthodox stockpiles of state’s own procurement and imports. Identify the most vulnerable imported and domestic food lines and announce the policy. Start tracking source-country wise import landed costs, create early-warning mechanisms for freight, fertilizer and crop prices in supplier countries such as Australia, Brazil, Canada and Myanmar. The old assumption that global markets will always supply on reasonable terms is no longer safe. In stress periods, exporters protect themselves first like India did in previous years.
The world is entering another age of cascading shocks, where wars set off chain reactions across fuel, fertilizer, food and finance. Pakistan is not powerless, but it is exposed. Its fault lines are familiar: import dependence, narrow buffers, administrative inertia and delayed decision-making.
The true test is whether policymakers now recognize that the aftermath of the Iran war is not a headline problem. It is a balance-of-payments problem, an inflation problem, a farm-input problem and ultimately a food-security problem.
Time bombs do not announce the moment of explosion. They tick quietly. Pakistan still has time to defuse this one — but only if it acts before the next invoice arrives.
Copyright Business Recorder, 2026
The writer is a former Vice President KCCI and an independent economic analyst
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