Economic Impact of Iran-US Conflict on Pakistan: Supply Chains, Inflation and Energy Security

Abstract

This study analyzes the economic ramifications of the Iran-USA conflict on Pakistan with a particular emphasis on the impact on the supply chain, inflation and energy security issues. The research also unravels the impact of geopolitical turbulence in the Gulf region on global oil prices, shipping routes and international trade system as a whole and how this impacts the domestic economy in Pakistan. The higher the price of fuel, the higher the transportation and production cost, which causes inflation and decreases consumers' purchasing power. In addition, the disruption of sea transport and of energy supply causes uncertainty in energy production and the economy. This study is a qualitative research that utilizes secondary data obtained from report, journal, and international financial institutions. The results indicated that Pakistan's overreliance on energy import and import of foreign goods increases Pakistan's susceptibility to the conflicts of the region. The paper suggests that the policy changes, energy diversification, strategic stocks and regional economic cooperation are needed to mitigate economic vulnerability of Pakistan in the event of a geopolitical crisis policies.