Business confidence in Pakistan deteriorates sharply amid Middle East escalation, finds OICCI survey

Business confidence in Pakistan deteriorated sharply during the second quarter of 2026 as escalating geopolitical tensions in the Middle East weighed on investment plans, disrupted supply chains and fuelled cost pressures, revealed the Overseas Investors Chamber of Commerce and Industry’s (OICCI) Business Confidence Index survey result released on Tuesday.

As per OICCI’s Business Confidence Index (BCI) Survey Wave 29, conducted across Pakistan in the second quarter of 2026, business sentiment deteriorated, with the overall BCI falling 9 percentage points to a positive 13%, down from 22% percent in Wave 28.

“The decline is driven primarily by elevated inflationary pressures, rising fuel costs, and the intensifying fallout from the war in the Middle East,” read the report.

The services sector recorded the sharpest drop, falling 20 points to 14%, while manufacturing declined by 7 points.

The retail sector was the only segment to show improvement, rising 3 points to a positive 20%.

As per the survey findings, investment intentions have weakened sharply among businesses, with the New Investment Index collapsing 10 points to just 2%, reflecting a near-total freeze in near-term capital deployment.

“Around 70–80% of businesses across all sectors are delaying or revising investment decisions and diversifying supply chains to reduce exposure to affected trade routes.

“The strategic focus is shifting towards risk mitigation and operational resilience,” it said.

Meanwhile, the survey’s global business situation indicator deteriorated by 31 points, and businesses across all sectors expect the disruption to persist well beyond six months.

“The results of Wave 29 are a clear signal that businesses operating in Pakistan are navigating an increasingly complex environment,” said Abdul Aleem, Secretary General, OICCI.

“The ripple effects of the Middle East conflict are being felt across every sector, from investment freezes to supply chain restructuring. While the fundamentals of the Pakistani market remain intact, restoring business confidence will require policy stability, cost relief, and a concerted effort to shield the economy from prolonged geopolitical uncertainty.”

Looking ahead, 34% of respondents anticipate a negative outlook over the next six months, up sharply from 22% in Wave 28, with political instability, fuel prices, and inflation cited as the top concerns.

When asked about the key structural threats to business growth, rising inflation topped the list at 84%, followed by high taxation at 79%, and concerns over currency stability and inconsistent government policies both at 61%.

Business confidence among OICCI member companies, representing the country’s leading foreign investors, remained relatively resilient, improving marginally to a positive 28%.

Metropolitan confidence fell 12 points to 11%, while non-metro cities, including Peshawar, Quetta, Rawalpindi, Multan, Sialkot, and Sukkur, saw a modest 3-point improvement to 22%.

The survey found growing business interest in generative AI adoption, with OICCI member companies showing notably higher readiness for large-scale integration across technology platforms, core business processes, and workforce development, signalling that despite near-term headwinds, leading foreign investors are positioning for long-term transformation.