The Institute of Cost and Management Accountants of Pakistan (ICMAP) has issued a policy-focused assessment of the potential economic fallout from the ongoing Iran-Israel conflict, bolstering the government’s formation of a high-level committee to evaluate emerging economic risks for the country.
Developed by ICMAP’s Research and Publications Department, the 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, it warns, 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.
The analysis warns that any disruption in the Strait of Hormuz—through which nearly 20% of global oil and LNG transit—could drive oil prices up to $100-$130/barrel. Not only would this substantially increase Pakistan’s energy import bill and elevate power generation costs, it would also accelerate inflation, with wide-ranging effects on food production, transportation, and household expenditures.
The report further highlights rising risks to financial stability, emphasizing the erosion of macroeconomic resilience if the rupee depreciates, increasing external debt servicing costs, and fiscal pressure from potential fuel subsidies. Exporters are already facing sharp increases in shipping insurance premiums, reportedly climbing from $400-$2,000/container, 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.
ICMAP has proposed proactively addressing these challenges by establishing a Strategic Economic Task Force comprising the ministries of Finance, Commerce, Energy (Petroleum Division), Foreign Affairs, Planning, Development and Special Initiatives, Defense, and the State Bank of Pakistan. This task force would be responsible for monitoring global developments and coordinating timely, cross-institutional policy responses to safeguard Pakistan’s economic stability.
The organization further recommends expanding Pakistan’s strategic petroleum reserves from the existing 21 days to at least 90 days of national demand. It suggests financing this buffer 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. It also proposes accelerating the modernization of local oil refineries, potentially saving up to $1 billion annually.
The report proposes reversing recent taxes on solar panel imports and fast-tracking the implementation of the 10,000MW Solar Initiative to promote clean energy and enhance long-term energy resilience. It also 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 and establishing an Energy Shock Stabilization Fund in collaboration with multilateral development partners to strengthen fiscal buffers. The organization has cautioned that while the Iran-Israel conflict remains militarily contained, its broader economic implications risks derailing Pakistan’s economic outlook. It stresses that only a proactive, well-coordinated, and forward-looking policy response can ensure economic stability and preparedness in these uncertain times.