Pakistan’s energy security has once again emerged as one of the country’s most pressing national concerns as renewed conflict in the Middle East threatens global oil supplies and maritime trade. The latest tensions between the United States and Iran, coupled with repeated disruptions to shipping through the Strait of Hormuz, have exposed the vulnerability of Pakistan’s energy-dependent economy. The recurring crises serve as a stark reminder that the country can no longer rely on temporary diplomatic calm or hope that geopolitical tensions will not affect its economic stability. Instead, Pakistan must treat the current situation as an opportunity to undertake long-overdue structural reforms that can safeguard its energy future.

The Strait of Hormuz remains one of the world’s most important energy corridors, carrying nearly one-fifth of global oil supplies. For Pakistan, which imports the overwhelming majority of its crude oil, petroleum products and liquefied natural gas (LNG) from Gulf countries, the waterway is nothing less than an economic lifeline. Any disruption in this strategic passage immediately translates into higher fuel prices, increased freight and insurance costs, supply shortages and inflationary pressures throughout the economy.

Recognising these growing risks, the government has initiated one of the most significant reforms in its energy security framework by deciding to establish the country’s first-ever Strategic Petroleum Reserves (SPR). At present, Pakistan largely operates on a fragile “just-in-time” inventory system that leaves little room to absorb prolonged supply disruptions. Under the proposed strategy, the government plans to create emergency oil reserves sufficient for 45 days during the first phase, eventually expanding storage capacity to cover 90 days of national consumption. During national emergencies, these reserves would be placed under government control to ensure uninterrupted energy supplies.

This initiative marks an important shift in Pakistan’s strategic thinking. Most major energy-importing countries maintain strategic reserves precisely to protect their economies against geopolitical shocks, natural disasters and market volatility. Pakistan’s decision therefore represents not merely an emergency response but the beginning of a more comprehensive national energy security policy.

Complementing this initiative is the government’s plan to develop a Pakistan Maritime Energy City at Gwadar Port. The project envisions inviting Gulf countries, particularly Saudi Arabia and Kuwait, to establish strategic crude oil storage facilities at Gwadar. Such an arrangement would provide Gulf producers with secure storage outside the immediate conflict zone while simultaneously granting Pakistan preferential access to these reserves during emergencies. If implemented successfully, Gwadar could evolve into a major regional energy hub serving both commercial and strategic purposes.

The government is also seeking immediate financial relief to cushion the economic impact of rising energy costs. Pakistan has reportedly requested Saudi Arabia to provide a $6.7 billion deferred-payment oil facility on exceptionally concessional terms, including an interest rate of just one percent, a repayment period of fifteen years and a five-year grace period. The proposal represents a substantial improvement over the previous $1.2 billion arrangement agreed in early 2025 at significantly higher financing costs. Such support would help preserve Pakistan’s foreign exchange reserves while reducing pressure on the balance of payments.

The growing strategic partnership between Pakistan and Saudi Arabia has become important in this context. Since the signing of the Strategic Mutual Defence Agreement in September 2025, Saudi Arabia has emerged as one of Pakistan’s most dependable financial partners, extending deposits, investment commitments and other forms of economic assistance. This growing relationship has acquired even greater significance as regional instability continues to threaten energy markets.

However, financial assistance alone cannot solve Pakistan’s deeper structural vulnerabilities. The repeated closure and reopening of the Strait of Hormuz has demonstrated how dependent Pakistan remains on a single maritime corridor for its energy supplies. Every disruption immediately pushes up import costs, fuels inflation and complicates macroeconomic management. The government faces an unenviable fiscal dilemma: either pass on higher fuel prices to consumers, risking inflation and public dissatisfaction, or absorb part of the burden through subsidies, thereby undermining fiscal consolidation commitments under the IMF programme.

The economic consequences extend well beyond energy prices. Higher oil and gas import costs widen Pakistan’s already substantial trade deficit and place additional strain on scarce foreign exchange reserves. The country’s narrow export base further compounds these vulnerabilities. During the last fiscal year, imports of approximately $69.76 billion far exceeded export earnings of about $30.14 billion, with workers’ remittances of around $41.6 billion playing a crucial role in bridging the external financing gap. Yet reliance on remittances also carries risks. A prolonged economic downturn in Gulf countries, disruptions to overseas employment or the large-scale return of Pakistani workers could significantly reduce remittance inflows, thereby weakening one of Pakistan’s most important sources of foreign exchange.

Pakistan has begun exploring options to diversify its energy imports. Saudi Arabia has examined alternative export routes through Yanbu on the Red Sea, while Islamabad is considering sourcing crude oil and petroleum products from additional suppliers. Nevertheless, these alternatives cannot immediately replace the cost advantages, logistical efficiency and scale of supplies traditionally routed through the Gulf via the Strait of Hormuz. Diversification is therefore a gradual process rather than an immediate solution.

The current crisis also underlines the urgent need to expand Pakistan’s domestic energy production. Greater investment in indigenous natural gas exploration, hydroelectric power, solar energy, wind projects and other renewable resources can gradually reduce dependence on imported fossil fuels. Accelerating the transition towards cleaner energy would not only strengthen energy security but also improve environmental sustainability and reduce long-term import costs. Lasting energy security will require a broader transformation based on domestic energy development, diversified supply routes, stronger exports, larger strategic reserves and sound macroeconomic management.