Assessment warns that rising oil, freight and fertiliser costs, along with risks to remittances, could deepen poverty and increase economic vulnerability.
ISLAMABAD: The ongoing Iran-US conflict could push more Pakistanis below the poverty line by driving up the cost of fuel, food and transport, while disrupting trade and remittance flows, according to an official assessment highlighting Pakistan’s growing exposure to geopolitical shocks in the Middle East, according to an official report released by the ministry of finance.
The assessment notes that Pakistan’s national poverty rate has increased from 21.9 percent in 2018-19 to 28.9 per cent in 2024-25, leaving millions of households increasingly vulnerable to further economic disruptions arising from global conflicts.
According to the report, military escalation in the Middle East demonstrates how geopolitical crises can quickly spill over into domestic economies through higher prices of oil, freight, fertilisers and essential food items.
Region highly exposed to oil and trade disruptions
A regional assessment by the United Nations Development Programme (UNDP) found that 33 of the 36 countries in Asia and the Pacific are highly vulnerable to oil price shocks.
The report also identified 25 countries facing significant risks from trade and supply chain disruptions, while 22 countries remain exposed to food and fertiliser market volatility.
Even under a short-term disruption scenario, the UNDP estimates economic losses across the region could range between $97 billion and $299 billion, with around 8.8 million people at risk of falling into poverty.
Poor households expected to suffer the most
The assessment warns that low-income households are likely to bear the greatest burden of rising prices caused by geopolitical instability.
War-risk insurance premiums for vessels transiting the Persian Gulf have reportedly increased by more than 1,000 per cent in some cases, significantly raising shipping costs.
At the same time, cargo vessels rerouting around conflict zones have extended shipping times between Asia and Europe from approximately 31 days to 41 days, adding further pressure to global supply chains.
The report also highlights sharp increases in fertiliser prices, noting that Middle Eastern urea prices have risen from below $500 per tonne to more than $700 per tonne, increasing production costs for farmers and raising concerns over future food inflation.
Countries including Pakistan, India, Nepal and Sri Lanka remain particularly exposed because of their dependence on Gulf energy supplies, trade routes, labour markets and remittance inflows.
Pakistan faces heightened economic risks
The report identifies Pakistan as one of the countries most vulnerable to prolonged instability in the Middle East because of its strong economic ties with the region.
Around 55 per cent of Pakistan’s workers’ remittances originate from Middle Eastern countries, making household incomes and foreign exchange earnings highly susceptible to any disruption in regional labour markets or financial flows.
A prolonged conflict, the assessment warns, could weaken household purchasing power, increase food insecurity and place additional financial pressure on families that rely on overseas remittances.
Stronger social protection recommended
The assessment acknowledges that Pakistan has expanded its social protection programmes in recent years but stresses the need for further reforms to improve resilience against external shocks.
During FY2025-26, the Benazir Income Support Programme (BISP) provided Unconditional Cash Transfers (UCTs) to 10.20 million beneficiaries and Conditional Cash Transfers (CCTs) to 6.59 million beneficiaries.
The government is also rolling out Social Protection Wallets for approximately 10 million beneficiary households to improve the efficiency, transparency and accessibility of welfare payments.
The report recommends that Pakistan transition from conventional welfare programmes to shock-responsive social protection, enabling authorities to deliver rapid, targeted and digitally enabled assistance during periods of international economic disruption.
It concludes that in an increasingly uncertain global environment, external geopolitical conflicts can quickly translate into domestic economic hardship, making investment in resilient social protection systems essential to safeguard livelihoods and prevent temporary global crises from becoming long-term poverty challenges.