Strait of Hormuz Blockage Threatens Global Energy Flows
Escalating tensions in the Gulf have once again put the spotlight on the Strait of Hormuz, one of the most important energy corridors in the world. Around 20 to 21 million barrels per day of crude oil, condensate and refined fuels moved through the passage in 2023–24, equal to roughly one-fifth of global petroleum liquids consumption.
The strait is also critical for gas exports. Nearly 20 percent of global liquefied natural gas (LNG) trade, mainly from Qatar and the United Arab Emirates, passes through Hormuz on its way to Asian buyers. Analysts warn that if shipping remains blocked for an extended period, oil prices could jump into a range of $100 to $150 per barrel, driving up energy costs worldwide.
Pakistan’s Heavy Dependence on Gulf Oil and Gas
Pakistan is deeply exposed to any prolonged disruption in traffic through the Strait of Hormuz. The country imports LNG from Qatar, diesel from Kuwait and most of its crude oil from Abu Dhabi National Oil Company (ADNOC), with almost all of these shipments typically routed through the Gulf and Hormuz.
Officials say two crude tankers bound for Pakistan, including one operated by Pakistan National Shipping Corporation, are currently stranded in or near the strait, while another crude cargo waiting to load may not be able to sail under present conditions. LPG imports by both sea and land routes have also slowed sharply, raising the risk of domestic shortages and price spikes in the local market.
Stocks Provide Short-Term Buffer, But Risks Are Rising
In response to the growing uncertainty, a second high-level meeting in as many days was held on Sunday to review Pakistan’s fuel security. The session was chaired by Petroleum Minister Ali Pervaiz Malik and Finance Minister Muhammad Aurangzeb, who examined the latest data on petroleum stocks and import flows.
Pakistan currently holds around 30 days of petrol and high-speed diesel inventories, which offers a short-term buffer. However, if hostilities continue beyond the coming week, the country could face serious constraints on supplies of crude, LNG and imported diesel. In that case, authorities may be forced to buy more refined products, particularly diesel, from the spot market in Singapore at higher freight and insurance costs, adding pressure on prices and the external account.
Saudi Red Sea Route and Alternative Supply Options
As part of its contingency planning, Pakistan is considering seeking inclusion in Saudi Arabia’s list of preferred crude buyers served via the Red Sea. Saudi Arabia’s East–West pipeline carries oil from its eastern producing fields to export terminals on the Red Sea coast, allowing shipments to bypass the Strait of Hormuz entirely.
From there, Saudi Arabia already supplies major Asian buyers such as China, Japan, South Korea and India. Securing similar access would help Pakistan keep its refineries running even if Gulf shipping lanes remain compromised. Pakistan already imports a large share of its petrol from Singapore, and diesel purchases from the same market could increase if the situation remains tense, though these options come with higher costs.
Private refiners may also provide some flexibility. Cnergyico Pk Ltd., which operates a 156,000-barrel-per-day refinery, has in the past imported US West Texas Intermediate (WTI) crude in large cargoes that avoided Hormuz-linked supply chains. Policymakers could look at similar routes again to diversify supply and reduce risk.
Potential Economic Impact of a Prolonged Disruption
Pakistan produces about 70,000 barrels per day of crude oil domestically but imports around 300,000 barrels per day to meet refinery demand. Roughly 70 percent of local petrol consumption is met through imports, while about 70 percent of diesel demand is covered by domestic refinery output backed by imported crude.
If the Strait of Hormuz remains blocked for more than 10 to 12 days, Pakistan could face one of its most serious energy supply challenges in recent years. A prolonged disruption would likely push up fuel and LPG prices, worsen gas shortages, widen the current account deficit and add to inflation and foreign exchange pressures. For now, existing stocks and incoming LNG cargoes that crossed Hormuz before the latest escalation provide temporary relief, but policymakers are clearly preparing for the possibility that the crisis may last longer than hoped.
