Wars always have unintended consequences. But the blockade of the Strait of Hormuz, through which more than 20% of the world’s oil is shipped, was not unknown. It was inevitable when jointly with Israel, the US launched Operation Epic Fury against Iran on 28 February 2026. Even a college student with a rudimentary knowledge of warfare could have predicted it.
Of course, as Prussian Field Marshal Helmuth von Moltke the Elder noted more than a century ago, no battle plan survives the first 24 hours of contact with the enemy. Operation Epic Fury has validated the truth of Moltke’s principle, and run into many unknowns.
The first unknown: How long will Iran be able to blockade the Strait of Hormuz? It will depend on Iran’s ability to withstand the massive onslaught of missiles and bombs, and on whether the Gulf Arab states will join Israel and the US in attacking Iran. Perhaps to ward off that threat, the Iranian president has already apologised for attacking its Arab neighbours, saying future attacks will be confined to those countries that are actively supporting Operation Epic Fury.
The second unknown: what will be the impact of the blockade on restricting the supply of oil and LNG from the Gulf? Will countries be able to bypass the blockade, for example, by exporting from Saudi Arabia? Or will the US navy’s Fifth Fleet be able to end the blockade?
The third unknown, which is probably the biggest unknown: How long will the war last? Just about no one can answer that question. The US president has called Iran to surrender unconditionally, echoing the words President Truman used against Japan in the summer of 1945. But Truman said that after almost four years of war with Japan. The Iran War is only in its second week now. Back in the 1980s, Iran fought a border war with Iraq for eight years, but admittedly Israel and the US have unleashed more firepower on Iran in a week than Iraq probably did in eight years.
The fourth unknown: What will be Iran’s ability to cope with the relentless bombardment? Will Israel and the US initiate ground operations against Iran, using the Kurds as the tip of the spear? Will anti-regime forces within Iran succeed in removing the clerics from power? Those are the big unknowns on which many analysts are weighing in. One of the most trenchant analyses was presented by Vali Nasr, professor at Johns Hopkins University. I had the pleasure of meeting him years ago when he was affiliated with the Naval Postgraduate School in Monterey.
Here is where we stand as of this writing. Iran’s blockade of the Strait of Hormuz is already beginning to take its effects on the world's energy supplies. According to one source, the price of oil has already crossed $90/bbl on Friday, the highest since August 2022. Gasoline prices in the US have gone up by 11% since the war began.
On February 27, a day before the war began, J P Morgan was saying that crude oil prices would average $60/bbl in 2026 because of “soft supply-demand fundamentals.” They went on to say that “Despite rising tensions between the U.S. and Iran, protracted disruptions to oil supply are unlikely.”
For every $10 rise in oil prices, the current account deficit increases by roughly $1.5–$2 billion. If prices were to climb to $100, the deficit could expand by $5–$7bn on an annualised basis
Qatar’s Energy Minister Saad al-Kaabi has stated that Gulf exporters would halt production within days if tankers were unable to pass through the Strait of Hormuz. The strait is a crucial route that normally handles about 20 million barrels of oil and petroleum products per day. The US signalled possible actions to ease pressure, including the potential release of oil from strategic reserves, while also temporarily allowing India to purchase some Russian crude already at sea. Meanwhile, Saudi Arabia raised oil prices for Asian buyers and redirected shipments through Red Sea ports to bypass Hormuz.
The Dow Jones Industrial Index, a widely used barometer of the stock market in the US, has fallen from 50,000 points to 47,501 in a month. Just a week ago it stood at 49,801.
What will be the impact on Pakistan’s energy consumers and the economy as a whole? The price of petrol in Pakistan has already gone up by 20%, even though Pakistan has a 28-day supply of oil which was purchased at a much lower price months ago. It stands at Rs 321.17/litre, or $4.34/gallon, 26% higher than the US average price of $3.45/gallon. In one expert’s opinion, the government is raising the price of petrol in part to lower the budget deficit, to comply with the IMF requirements.
It is worth nothing that the average residential electric rate in Pakistan is around 23 cents/kWh, 27.7% higher than the 18 cents/kWh in the US. Due to the Iran War, electricity prices are likely to go up.
All of this is coming at a difficult time for the average Pakistani, who already faces a substantially higher energy burden compared to the average American, since Pakistan’s per capita income (measured using purchasing power parity) is less than a tenth of the US per capita income.
I asked Dr Manzoor Ahmad if the price of petrol in Pakistan will continue to rise. He said “The extent of any further increase in domestic fuel prices will largely depend on developments in the international energy market. The recent price adjustment reflects the quantum of surge in global oil prices. In addition, the government may consider temporary demand-management measures, such as reducing the working week to four days, to curb fuel consumption.” According to another analyst, the government is already considering the imposition of telecommuting to work, as they did during the pandemic shutdown.
For Pakistan, even modest increases can take a substantial toll on the economy. For every $10 rise in oil prices, the current account deficit increases by roughly $1.5–$2 billion, explains former chief executive officer of the Pakistan Business Council, Ehsan Malik. “If prices were to climb to $100, the deficit could expand by $5–$7bn on an annualised basis, potentially undoing recent gains that allowed FY25 to post a $2bn current account surplus.”
When it comes to LNG, Qatar and the United Arab Emirates account for 99% of Pakistan’s LNG imports. With limited storage and procurement flexibility, Pakistan is especially vulnerable.
Agritech Fertilizer that runs on LNG has been shut down. As cited in one source, Agritech Fertilizer informed the Pakistan Stock Exchange that Sui Northern Gas Pipelines Limited had officially communicated to them that because of a ‘potential event of force majeure’ declared by their LNG supplier, production was being shut down at midnight on March 4, 2026.
Pakistan imports a good portion of its oil. To bypass the Strait of Hormuz, the oil which it purchases from Saudi Arabia will now come from a Red Sea port, but that will raise the costs of transporting that oil. Within Pakistan, just about all cars either run on diesel or petrol, with a few running on LNG. To curtail the demand for oil, the Government is asking people to begin telecommuting to work, as they did during the pandemic shutdown, and to eliminate all unnecessary travel by car. How successful that appeal will be remains to be seen.
Will electricity prices go up? According to one source, fossil fuels account for 53% of the generation mix, with natural gas alone contributing almost a quarter of the total. On the low-carbon side, Pakistan achieves more than 46% of its electricity from clean energy sources. Hydropower leads the way, contributing nearly 19%, while nuclear energy provides a substantial 13%. Solar energy, with over 10%, underlines its growing role, whereas wind energy contributes about 3% and biofuels make up just over 1%.
A question naturally arises whether customers who have installed solar panels on their houses, and possibly paired them with batteries, will be able to ride out any ensuing increases in the price of electricity and any ensuing power outages. There is little doubt that households with both solar panels and batteries have a good chance of mitigating the impact of the oil shock, as it reverberates through the power sector.
However, very few households have solar panels, and only a tiny fraction have paired them with batteries. According to Omais Abdur Rehman of Renewable Energy Technologies, there are 37 million customers in Pakistan, but only 0.5 million customers have grid-connected solar systems. Most solar systems are not grid connected. Out of 33.4 GW solar installed in Pakistan (including on and off grid), only 7 GW is connected to the electricity grid.
Unfortunately, instead of encouraging more households to install solar panels, Pakistan’s NEPRA has decided to end net metering, as discussed in my previous column. That decision should be reversed.
Even with solar panels, just about all households still need to buy petrol to drive their cars. The share of cars in Pakistan that are electric vehicles is miniscule, even though that is beginning to change with time. These households, like all other households, also need to buy Sui gas for cooking, heating their water, and heating their homes in the winter. Thus, they will only modestly be screened from any ensuing energy crisis that is triggered by Epic Fury.
According to another source, Pakistan imports a significant portion of its petroleum needs, with oil imports accounting for roughly 40% of its total consumption. In terms of specific refined products like gasoline, the country is heavily reliant on imports due to insufficient and low-quality domestic production, with imports often filling a large portion of the demand gap.
In fiscal year 2022-23, Pakistan imported 8.2 million tons of refined petroleum products, of which 3.9 million tons were gasoline. Approximately 90% or more of Pakistan's crude oil imports come from the Gulf region, specifically from countries like Saudi Arabia and the United Arab Emirates (UAE). In 2024, these countries accounted for nearly 91% of Pakistan's crude intake, which averaged 169,000 barrels per day (bpd). The Gulf is also the primary supplier of refined petroleum, and 99% of its LNG imports.
Petroleum products are among Pakistan’s top imports, with the energy import bill reaching $17.5 billion in 2023. When the import bill rises, the balance of trade falls further into the red, the Rupee depreciates, the fiscal balance also further into the red, inflation rises, international borrowing rises and growth stalls. That will breed resentment and instability in the country, whose political balance is already quite tenuous. Compounding the problem, it is fighting a war with Afghanistan and has signed a defense pact with the Saudis, which may force it into a war with Iran.
To sum it up, Operation Epic Fury will have a deleterious impact on Pakistan, not just on its energy sector but on the entire economy. It should leverage its close ties with the Gulf countries to exert pressure on the US administration to end the conflict.